Application images (or app.bin files) are a disk with a filesystem in a file. So instead of formatting your HDD you format the file and copy files into it. There are two major file systems that make sense to be used for the app.bin files: ext3 and cramfs.
ext3 is a widely used Linux filesystem that should be used for app.bin files where the application must write to the app.bin file, e.g. to cache downloaded files. cramfs (compressed ROM file system (don't ask me why is ram instead of rom)) on the other hand is a filesystem that is readonly, so ideally for themes because they are a fixed set of files.
In general it doesn't matter which one you use when you don't need write access to the app.bin file, but the cramfs has the advantage that it does not take damage in case of a crash due to power loss of the WDTV. Its an unlikely event, but can happen and in this case the app.bin file must be replaced with a fresh copy. http://sourceforge.net/apps/trac/wdtvtools/wiki/Tutorials/CreateApplicationImage
Is this what we should follow to create app.bin ?
Anyone have a guide on how to compile app.bin ?