Steve Jobs, speaking at D conference, announced that YouTube is now embedded into the AppleTV interface and works off a live Internet connection, that it does not have to go through the PC. You can see all YouTube videos, most viewed, search and other normal site functions.
Jobs: The biggest thing limiting the quality of video on YouTube is the source of the material. It is amazing how fun these things are. Our model for Apple TV is like DVD player for the internet.
All the pics from D on the Flickr stream here.