Tim Bray recently tried out BitTorrent and didn't see what all the fuss is about. Maybe I can help.
At heart, BitTorrent is nothing more or less than a way of distributing largish (by today's standards, anyway) files around the Internet efficiently, reliably, and without the need for the original distributor to subsidize the bandwidth costs. It is truly legality-neutral, in that there are compelling applications in each of the domains of legal, illegal, and ethical but technically illegal. It is not spyware or anything nasty like most of the commercial P2P clients. Rather, it's distributed under a very liberal license, which makes it possible to integrate deeply with other applications that might need of large files. You haven't seen any of these applications yet because BitTorrent is still young.
Combined with three other technological developments, BitTorrent makes digital video practical for ordinary people. (The other developments are, of course, spiffy video codecs such as MPEG-4, GHz computers, and Mbit/s Internet.) From a technological point of view, people can what what they want, when they want. I think that's a game-changer.
Of course, most of the movies and TV shows that people want to watch are illegal, but that's just because Hollywood hasn't figured out a business model that takes into account the fact that such a thing is now, just this year, practical on a wide scale. Actually, I feel it's a shame that the MPAA isn't successful in their crusade to reeducate Internet movie traders; if they were, it would greatly increase interest in public domain materials, as well as artists who want to release their work under licenses such as Creative Commons. Ultimately, of course, I hope a good business model does emerge, preferably one that rewards the actual creators.
In the meantime, there's plenty of perfectly legal content to be had, including Linux distros, freely available audio such as etree, game demos, and more. I'm not sure whether Fanimatrix counts as perfectly legal or not, but in any case I'm sure they appreciate not having to cough up a dime for bandwidth every time someone clicks on the download link.
And anime, one of the earliest adopters of BitTorrent, is also very interesting. While releasing Japanese shows with English subtitles is technically a copyright violation, most in the scene abide by an ethical code which looks out for the interests of the creators - as soon as a show is licensed in the US, it is removed. Before then, I'm sure the exposure to hardcore anime fans helps shows find a market. It also helps out the US licensees, because they get to see which shows are popular. It's hard to point to anyone who's really getting hurt.
As it happens, our family watches the majority of its TV off BitTorrent now. Heather and I are both more than a bit interested in Japanese culture (she spent two years there and has written a novel based on her experiences), and the kids really love the shows. I like reading the subtitles to them; it feels like a nice middle ground between slackjawed TV watching and reading from books (of course, we do more than our share of the latter, as well). Just this evening, Max was asking when the next episode of Machine Robo Rescue was coming out, and yesterday he was absolutely thrilled to get a Hyper Fire Robo toy, imported to the anime/manga store at our local Asian market. Commerce!
There's another impact BT is poised to make. Now, all of a sudden, digital video is on the computer technology curve, not the video technology curve. HDTV has been the video technology of the future for about 20 years now. I still don't have any HDTV gear, but I've watched some movie trailers in 720p, downloaded using BitTorrent, of course. HD isn't widespread yet, but all you need is 3 GHz computers instead of 1 GHz, nice monitors, and fast DSL like they have in Korea. Does anyone seriously doubt that this will happen, and soon?
Lastly, the BT protocol itself is exceedingly robust (it uses cryptographically sound hashes to ensure the integrity of the files it transfers), and has a simple interface to the rest of the world. That's maybe not so easy to see on a PC where flakiness and needless complexity rule, but quite important when integrating BitTorrent into an appliance. I'm hoping to buy one of those mini-ITX boxes for the family this Christmas, and stick some simple Python scripts on it so the kids can select their own shows to download.
P.S. Tim, the reason why your player didn't have the right codec is essentially political, and easily fixed by, say, a full MPlayer install. Maybe you haven't seen it with your own eyes yet, but hopefully I've helped you see why your Editor-of-a-very well-known-publication friend is right. BitTorrent is a game-changer.