I've had the same problem with my Apple TV and Netflix since the last software update.
Some widescreen shows and movies get smushed down to fit in the 4:3 area, so the picture is distorted. This happens randomly, and some tv shows and movies will switch halfway through the episode.
My kids were watching Good Luck Charlie (which is widescreen HD) and about 5 minutes into the show, it switched from 16:9 to smushed 4:3.
Another movie I noticed it on was Airport (I know, a fantastic movie). On my Mac, Xbox 360, and iPad the movie is widescreen. On the ATV, it's picture is smushed and distorted into 4:3.
On another thread, I mentioned that Santa Clause 2 was distorted. I went back and checked a few days later, and it was again widescreen - for a few minutes, then it went back to 4:3.
I've reset the ATV and restored the ATV without change.
Hopefully a software update will address this. In the meantime, we've been using the xbox to watch Netflix.