It would be so much easier to just hook a DVD or Bluray player into a home theater system then to go to the hassle of building a HTPC (Home Theater Personal Computer) system if it were not for all the benefits that a HTPC offers.
Using a HTPC, you can not only play movies, you can listen to music, watch slideshows, run applications, surf the web, and have the ability to have your complete collection of movies always at your finger tips.
Enhancing the viewing experience:
With a DVD or Bluray player, you place the movie in the machine, and you hit play. You have to surf through the stuff you do not want to see, to even get to the menu, then you can play the movie. What a pain, and does not even get close to a real movie experience.
With a HTPC, you can display a selection of movies available from a third part movie catalog system for your guests to choose from, and after they make a choice. You can also have background music playing, and maybe even a movie Q&A trivia slideshow before the movie starts. After you get ready to watch the movie, you can have a selection of movie trailers, just as you would in a real theater, maybe including the dancing "Go to the Lobby" snacks. You might want to even throw in an old newsreel and cartoon to boot. Then you can either go to the trailer of the movie that you want to watch, or straight to the movie. You control the complete movie experience.
Many HTPC system copy their movies to their hard drive for easy access to to help protect the disk that the movie is on. To my knowledge, there has been no court ruling on movie use, but most people apply the same logic as the courts has ruled for music, which is you are allowed to make a backup if you have purchased it. Thus, you will find that many HTPC systems has stored their movies as "MKV" formatted files on their hard drives for easy access.
Home Theaters are more then about just watching a movie, it is about the total experience. A HTPC system helps deliver an enhanced experience.