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The holy grail of TV distribution is the integration of computers and TVs. To that end, Amazon.com (AMZN) and TiVo (TIVO) are getting together to test a new service that will enable users to watch rented or purchased videos via the Internet, to be watched on TVs.

The two companies made the announcement right after Wal-Mart (WMT) released a beta version of its video download service. Probably what triggered the announcement was that Wal-Mart also said that by the end of the year, they should have in place a mechanism to transfer downloaded video to the TV set.

If this does pan out for them, it will give them a headstart and temporary differentiator as the other major services are focused on computers and handheld devices.

"It's one thing for viewers to be looking at YouTube content online, but when it comes to full-length television and movies, for most people, it's not television until it's really on the TV," TiVo Chief Executive Tom Rogers said in a phone interview.

"Amazon Unbox on TiVo" will be able to be downloaded to a user's TiVo box from their computer and then be able to be played back on their television. TV episodes can be pruchased for $1.99, and the majority of movies for between $9.99 and $14.99. Rentals start at $1.99.

Those videos that are purchased will be stored in a personal list at Amazon.com for access at any time. They still aren't able to be burned to DVDs unfortunately.

With the new service, TiVo subscribers will be able to rent or buy films and TV shows from most of the major networks including Time Warner (TWX), CBS (CBS), Fox Entertainment (NWS) and Universal Studios Home Entertainment (GE).