A media center can be built to do just about anything, which is why I like them.
Here's how I'd set it up.
1) I'd decide what kind of casing the PC needs. I'd usually put it in the living room (or wherever the most TV viewing happens) so what furniture etc you have makes a difference.
If you can get away with a big ugly computer tower (e.g. if you can hide it in furniture) you can do the media center on the cheap. Otherwise you either have to learn how to make a small one, or spend a bit more money on one that is built with a entertainment center case (e.g. one that will fit right in in any entertainment center's "stack" of hardware).
2) The computer is any old PC with these additional requirements and recommendations:
- A TV card (otherwise no TV)
- A decent video card with compatible output to your TV (can be phased in and changed later)
- Lots of hard drive space (recorded TV can take up a lot of space, you want a bare minimum of 100GB and the more the merrier). Note that you can put more storage space elsewhere on the home network for the recorded TV etc.
- A media center remote.
3) What you can do with it:
- First of all, I like it for it's non-computer like interface to digital music. I can have my entire music library available through remote control. The key is that it has all the extensibility and flexibility benefits of a computer (mp3s, syncing with portable players, networked libraries) but on a remote controlled interface that can be used at a distance.
- Secondly, I like it for its timeshifting abilities in TV with it's TV recorder. It connects to the internet and downloads a TV Guide and you can program it to record what you want in many ways (including a metadata search e.g. any show that has "keyword" in the title or description). You can also pause and rewind live TV because whatever you watch live is being recorded temporarily anyway. You can view live TV or record live TV on one channel for every TV card you have (there is sometimes a limit of 2 cards depending on software etc) but the recorded media can be streamed to many other "media center extenders".
- That brings me to the networking. You can network it with other computers, media centers, and media center extenders. So you can make it so that any other computer can access it's music and tv, and with media center extenders (the xbox is a media center extender, and there are many products around a dvd player's size that will also do this) you can you can also control the media center from other locations.
The advantage is that you can build out your network the way you want, the disadvantage is that it's still a bunch of computers and computers don't work out of the box the way a DVD player will.
Additionally, you can often get a DVR player for free or for a nominal fee from your cable provider which takes a big part of the media center's benefits away.
So if you want to be able to build over time the way you want, it's cool. But if you want something that is easy then the dedicated hardware options (e.g. a dedicated DVD player, a dedicated music player, a dedicated DVR etc) is more limited but easier.
The cost can be the same for either scenario. It's possible to find a $300 media center and build from there but it's also possible to find a $20 DVD player and rent the DVR player from the cable company.
You can learn more about the Microsoft Media Center software here: