Although iTunes can play a variety of .mp4, .m4v, and .mov video formats, Apple TV, the iPod, and the iPhone require more specific formats.
The iPod and the iPhone support up to 640x480 while Apple TV supports up to 1280x720. To optimize for all three platforms, we recommend that your source file is at least 640 pixels wide and that you use the built-in iPod converters in Compressor ("H.264 for iPod"), QuickTime Pro ("Movie to iPod") or iTunes ("Convert Selection for iPod").
Each of these maintains the aspect ration of your source file and results in an M4V file containing H.264 video (Low Complexity version of the Baseline profile) and AAC-LC audio.
If you want to maximize the screen area of a wide-screen TV, your source file should have an aspect ratio of 16:9 (e.g., 640x360). If you want to maximize the screen area on the iPod, your source file should have an aspect ratio of 4:3 (e.g., 640x480).