It's going to take a while, but maybe...
While I have a decent internet connection (roughly 6 Mbps), the thought of waiting for a standard def DVD to download so I can view it at standard def resolution seems a little silly. It may be coming, but it's not anywhere soon, and as other people have noted, given the readiness of cable providers to compress their HD content, my guess is that Apple (and others) will compress their media.
I also laugh at the notion that people will pay for a show that they could have watched for free. And, they pay for it so they can watch it on a tiny screen (come on, even the biggest computer monitors are somewhat smaller than most HT screens - granted, that's changing, but, are you going to want to invest several thousand dollars in a new screen so you can watch compressed video?).
And, I don't want to have to spend whatever it's going to cost to hook up a new device to my router so I can pipe downloaded content onto my 57-inch screen.
Yeah, I'll stick with physical media until a better reason to switch appears, but I'm guessing I'm not going to have a FIOS cable infrastructure any time soon.
Besides, I don't know about you, but I get a certain thrill when I open my media cabinet and see hundreds of CDs, SACDs, DVD-As, and DVDs waiting for me to go through them. It's the same thrill I get at the library or a good used book store.