Ok so you have a Sky+ HD box already yes?
That goes via HDMI/Scart or what ever feed into your TV from the box, that stays the same.
All this "magic box" aka the Wireless Adapter does is make your Sky+ box internet enabled, (think of this upgrade to make it it as a very basic PC with web browser)
So this box connects to your internet supply. It will then display all the content available, in a special section on the EPG Sky guide (you go to OnDemand) you then select said content and start downloading it to your box. Once a sufficient amount is there to play while its downloading in the background, it will start to play.
Remember you need to have unlimited internet, no bandwidth caps, as films are big data wise.
Also it mirrors your account, so you only get access to what you normally do via standard TV channels. Eg you won't get on demand movies, if you don't have the movies pack