Once the boot comes to an end, remove the USB stick, and cycle power again. If everything worked, you'll come back to the standard Apple TV main menu, but you'll end up with a single new entry, "Awkward TV", as shown in Figure 2.
Figure 2: Awkward TV Menu Entry
The Awkward TV selection (called an Apple TV plugin) is designed to allow you to download and install additional custom plugins, and also allows you to turn on both the sshd daemon, and an AFP file server. Figure 3 shows the Awkward TV sub menu.
Figure 3: Awkward TV Submenu
From this screen, you can see that I've enabled both the SSH and the AFP server. But this brings up one difficulty with expanding the ATV. When the Apple TV was first released, Apple included many extra, unused capabilities. But when the version 1.1 update came along, many of these unused capabilities, such as the AFP server, were stripped from the box. And Apple didn't just strip the executables, they also stripped many capabilities from the operating system kernel itself.
For example, under version 1.0, it was possible to remotely mount a Windows file share from the ssh command-line. But after the update, kernel support for Windows file-shares was removed, making it more difficult (but not impossible) to access Windows shares.
The Patchstick USB key supports both the original and the updated version, so you can modify your system even if you've taken the 1.1 upgrade. But if you're using a stock 1.1 system, you'll have to work a bit harder to extend the ATV.
Alternatively, you can use the "Factory Restore" option from the "Settings" menu to take you back to a 1.0 system and then you can do a selective upgrade to just take the additional 1.1 functionality, such as YouTube support. This process is described here and is the road I've decided to take for now. Depending on what Apple releases in the future, I may change my mind, but for now, I'm sticking with a 1.0+ system.
Once you've used the Awkward TV to enable SSH, you can log into the ATV with a user of frontrow and a password of frontrow. From my OSX command-line, the login command looked like:
# ssh frontrow@AppleTV.local
Note the use of the .local domain. Once the SSH daemon is up, it advertises itself on the network using Apple's Bonjour protocol so it can be automatically located. But Windows and Linux users will need to determine the box's IP address for login. Similarly, you can move files back and forth to the ATV using the secure copy command, scp, or if you've turned on the AFP server, mount it and move your files easily.