My friend sent me a facebook message asking me that question. I sat back and realized that there should be a post that directly address that ... so here is the answer.
What you will need at the bare minimum is a computer. Simply a computer. Something within the last year or two should work great.
I did a post early talking about hooking up a computer to the TV. In a nutshell, I would make sure the computer has S-Video, HDMI/DVI, and maybe (maybe) VGA. If you are rocking a DVI-out to HDMI-in, you will need to have some way to hook-up audio. Maybe PC Speakers or a Home Theater ... Odds are it will be better than those built in TV speakers.
Now we have a TV hooked up to your television. You are ready to stream TV from hulu.com, abc.com, cbs.com (and many others) for free. You can use pay-per-episode sites like iTunes and amazon.com/vod and subscription sites like netflix.com. Oh, and all of the wonderful video casts from places like msnbc and revision3.
There are numerous ways to customize this machine. You can add in a TV Tuner Card and record TV shows off the antenna. You can get wireless keyboard/mice and remotes to make navigation easier.
Just remember to have fun with it!