I'd suggest reading through some of the threads on the Apple TV/Home Theatre forum on how to do this. There are a number of programs available to rip (decrypt) DVDs and even blu-ray disks and others that can convert these ripped files to iPad friendly formats. As already mentioned, Handbrake is a favorite of most and rather easy to use.
As Hmac stated, using the Handbrake preset settings for converting to
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TV friendly format works on the iPad. I have in fact been able to watch movies encoded in 720p (and actually, even higher resolutions) from my blu-ray disks on my iPad with no problem whatsoever.
Also, the Air Video app works beautifully for streaming media stored on your home computer to your iPad--will even convert on the fly if necessary. Definitely worth the price ($2.99, I believe).