Before we being the XBMC installation process, it is important to note that Raspbmc is not as powerful as one of the full featured XBMC builds. It will not play Hulu, or Netflix, and super high bitrate 1080p streams will be choppy and will not play back correctly. This mostly depends on the audio quality of the 1080p video file, as well as if the stream is coming over wired or wireless LAN.
In addition, the XBMC UI will feel slower, and high resolution fan art will not load. This means that super high resolution XBMC skins will also not load correctly and in my opinion it is best to stick with the stock skin and try to stick to 720p content.
Now let's hook your Raspberry Pi up to your TV - everything should be pretty self-explanatory here. Plug the HDMI cable into an HDMI port on your TV, plug the Ethernet cable into your router, and plug the Micro USB power cable into your wall. When you plug it into the wall, it should turn on and boot up from the SD card, and at this point the installation process should begin.
This step is very much plug and play, so sit back, play some Battlefield 3 or Skyrim and come back in 15 to 25 minutes when it's finished. When it's done, it should automatically reboot into XBMC.
Configuring Raspbmc for Optimal Performance
Now that everything is installed and running, we need to configure XBMC for optimal performance on the Raspberry Pi. To do this we need to tweak the following settings.
First we need to adjust the Resolution, navigate to Settings > System > Video Output. You should change this to 720p. It should help the system and menus feel a little snappier. This should only be changed if you intend on playing 720p content, though - I recommend this since the Raspberry Pi is only capable of 720p output.
Overscan can be changed if your XBMC is "stretching" past your TV's boarders. To change this, navigate to Settings > System > Video Output > Video Calibration. There you will find a wizard that will assist you in setting up XBMC for your TV's resolution.
Finally we need to ensure that your Raspberry Pi can play back MPEG2 coded video files. A MPEG2 codec license will need to be purchased from the Raspberry Pi store and enabled under Programs > Raspbmc Settings > System Configuration. With this codec you can play MPEG-2 videos, which the Pi does not support out of the box. If you don't have any MPEG-2 videos, you can skip this, but I recommend purchasing it as the codec cost less than $4, and it will enable you to use MPEG2 in the future.
Once you have everything configured, you can map out your media shares as you would on a normal install of XBMC, or you can set up something like a dedicated media server that runs unRAID, and handles media streaming via Plex Media Server, which I personally love.