I picked one of these up today, and I have to say I'm very impressed.
For the most part, it just replicates what you see on the iPad on the TV, in 4:3 though, so you get black bars at the left and right of the screen. But many apps are optimised to work with the adaptor, so hitting play on something like YouTube, BBC iPlayer, or your home movies clears the iPad screen and sends the video to the TV in full widescreen glory.
I'm sure I'll find the TV Catchup app very handy too, which essentially converts the iPad into a Freeview box - perfect for the bedroom TV where I don't currently have an aerial or satellite feed.
Some games, such as Real Racing HD 2 uses a dual display. A full widescreen HD picture is sent to the TV, while the iPad acts as a map and steering wheel. Very clever.
Be warned though, some apps simply won't work as all, such as Sky Go and 4OD. But this is a decision of the companies behind the apps, not a problem with the device itself.