I have an iPad but have never used it for movie viewing. It's my understanding that you can only view purchased movies loaded through iTunes.
If someone with more knowledge has different information, please let me know.
There are lots of ways to watch TV or movies on an iPad. You can definitely do it through the iTunes store by purchasing movies or TV shows. The advantage there is that it's legal and that you can get it on any of your Apple devices (laptop, iPad, iPhone, Apple TV, etc.)
However, there are lots of other ways to watch movies and TV on your iPad. The major networks have their own apps with free TV shows available, and there's also a Hulu app.
Then, for fairly modest fees, you have other options, like Hulu Plus and Netflix. Personally, we've gone for Netflix and turned off our cable, since there's so much good stuff on Netflix—tons of movies and TV shows—and it's $8/month. We can watch it on the TV with an Apple TV (we're actually watching Bones
right now on Netflix on our TV as I surf GRF on a laptop).
If you're tech savvy and willing to violate copyright law, you can also Bittorrent movies for free and load them onto the iPad, though I obviously don't recommend doing anything illegal or quasi-legal.