Yep, there is an app for that. VLC for iPad It works by streaming the file from your PC or Mac to the iPad. I've tested it and it does work. App cost is $1.99 Requires a helper program on the PC/Mac to convert the video and stream it. Directions and troubleshooting materials are included. It was a fairly simple setup. Does require a bit of patience to process and prepare the video for streaming.
Interesting, as a previous version of VLC got pulled from the app store after someone complained that it would be a violation of the GNU license to put it in Apple's "walled garden" store. That guy who complained was a jerk. I'd say get the app now before some other jerk does the same thing.
I got Apple TV last weekend and have been trying to figure out how to download TG on my laptop, get it on my iPad, and mirror it on my tv. Sounds like this might be what I need to do.
You can also convert the format to something iTunes can read, and add it to your iTunes library. If iTunes can play it, then the Apple TV can play it. I use Handbrake on my Mac for file conversion, it has some presets that are handy.
There is an app called "Stream to me" which you install on the iPad. Then install "Serve to me" on your mac / pc. Configure the apps to point to your media folder on the computer, then you can view anything in that folder on the iPad (the mac / pc does all encoding / decoding on the fly, and video quality is pretty good). Depending on network traffic, it may stall or get a little choppy occasionally, but i've had a good amount of luck using this method.