Netflix recently released a FREE app that let's you watch movies on your phone. The app is free but you have to have an account to use it. The movies show very clear!
I mentioned it in here. Also a good place to learn about other apps. http://bbs.clutchfans.net/showthread.php?t=159566
This app is very cool. I watched a movie on it last night and it was crystal clear. If screen size is not an issue for you (twss?) then it works great especially because the sound is great through headphones. Of course, you want to use the wi-fi network and not the cellular data, but still very good. only drawback: It's geared for instant-play titles I think... you can't manage your dvd queues.