I can think of a few ways:

1) Siri integration.

"Let's watch the Cardinals game." "What movies are on HBO tonight?" "Facetime with my mother."

2) Convergence with other iOS devices/tools. iMessage/FaceTime on your TV. AirPlay mirroring. Play your stuff off iTunes. Remote control from your existing iOS device.

3) Well known, deep catalog of music/video content for purchase or rent.

If it works well, it'd be huge.

With an iTV Apple could control your entire media experience. Your snapshots from your iPhone, the music and movies your purchased would all transparently sync to your TV. They also know how to run an app store. I can imagine made for TV games that eat away at the console market by dominating casual gaming.

Add to that the fact Siri makes much more sense as part of a TV than a phone. The jump from the iPhone on screen keyboard to voice recognition was minor, the jump from a crappy remote control to voice is absolutely massive. A TV is not constrained by bandwidth or power so imagine how much more useful an always-on Siri would be. It could recognize your voice and integrate into your iPhone.

Apple aren't starting from nothing here. They have millions of customers who have bought into the Apple ecosystem. That is something other manafacturers cannot compete with.

There are a lot of possibilities, even without the Siri experience. I wrote a Quora answer early this year about the opportunities:

http://www.quora.com/Apple-TV/If-Apple-ever-releases-a-TV-th...

Imagine a giant iPad you hang on your wall. It is touch based, and you can use your iPhone and iPad to control it.

All they'd have to do to differentiate themselves in this market is:

Create a clean, easy-to-use, app-store-enabled experience, without lots of cables, multiple boxes, and ugly UIs.