AirPlay Mirroring displays anything that appears on your iPad 2 onto your TV screen, wirelessly via the latest Apple TV box (the small black one). It works with the core iPad 2 interface as well as any apps, games, videos, and so on. It even adjusts for portrait or landscape mode, completely mirroring everything you do with your iPad (thus the clever name).

This capability exists today to some degree in the form of AirPlay. You can stream video and audio from your iPad, iPhone and Mac to an Apple TV through enabled apps. Video mirroring is instead fully supported via an optional HDMI cable, but iOS 5 and Apple TV make it wireless. It also allows different things to be shown on the iPad and the TV screen, effectively giving you a dual-screen system.

I have already played with the existing AirPlay technology, effectively getting YouTube videos from the iPad to the TV screen wirelessly and while watching commenting the videos on social networks and checking email on the iPad.

I also have used CineXPlayer with the HDMI cable to watch DivX movies on the TV, while the iPad displays the remaining time on its screen.

With iOS 5 Airplay Mirroring, all Apps in the iTunes App Store will work and look great on your TV screen. Developers don’t have to do anything more: it’ll just work — as long as you have an iPad 2. In fact, it looks like this feature will only be available on the latest A5 chip.

Fortunately, it is very likely that the new iPhone and the next iPod Touch will both feature the A5 chip and support this feature.

iOS 5 wireless video mirroring and dual-display support opens up a huge world of opportunities for developers to create much more then media consumption apps.

The example everybody knows about is Real Racing 2 HD, that was reviewed by Engadget back in June.

The game will beam to your TV the in-car view while showing the track overview on your iPad. You use the iPad as a driving wheel to control the car on the screen.

Bottom line, this means once the new iPod Touch supporting AirPlay Mirroring comes out, that you can get an awesome gaming experience starting at 330 USD (99 for an Apple TV and 229 for an iPod Touch), which is about the cost of any gaming console.

But you get much more then that, because the new devices will allow you to do serious stuff on your TV screen, using the iPhone or the iPad as a controller. Think of iLife and iWork apps with a dual-display setup to create and show off your videos, music, presentations, video conferencing, just to name a few obvious things.

The key here is that you won’t get a sub-par experience like you do in today’s living room appliances ranging from gaming consoles like the Wii or the Xbox to the various media centers like Google’s, Microsoft’s or Roku’s: you get an Apple-quality — smooth, clean and pleasing — experience.

Finally, the living room revolution, the one that will bring TV Apps to the masses, is about to start.