From The New York Times: Cabling Your Mac,By ERIC A. TAUB

A new cable from NewerTech simplifies the transfer of high-quality video from your Mac to an HDTV.

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Improper cabling is the most common mistake made when setting up home theatre systems. Periodically I'll get a call or email from a friend or family member who just brought home their new HDTV, and the picture just doesn't seem right. More often than not, the obvious difference in picture quality from when you watched it in the store to when you set it up at home is the direct result of improper cabling. So here's the skinny, short and sweet.

ALWAYS USE COMPONENT VIDEO CONNECTIONS
Component video provides the best quality image, as it separates the video signal into three channels (red, green, blue), subsequently providing more bandwidth per channel. Audio is carried separately, usually via stereo RCA connections. For true HDTV you'll need to use the component connection, and its obviously ideal for other video sources as well (such as DVD players/recorders).