The Movie Theater is a shop which can be built in Ponyville or Canterlot. They cost 500 bits each and are 4X4 size.
Before 2.3 update, theaters in Ponyville and Canterlot were used to watch ads, which was an important way to earn gems. Once you bought theaters at that time, they could neither be sold nor kept as inventory.
2.4 update made the theater useless and couldn't sell, only be used as decors.
After 2.5 update, two theaters become different shops:
Ponyville theater :
Movie Pass (Item 1) : 3m0s, 1 gem to pass, generates 20 bits and 5XP
Baseball Cap (Item 2, 2-star pony) : 5m0s, 2 gems to pass, generates 30 bits and 8XP
3rd pony (2-star pony) bonus : 150 bits
Canterlot theater :
Tickets (Item 1) : 5m0s, 1 gem to pass, generates 30 bits and 5XP
3D Glasses (Item 2, 2-star pony) : 7m30s, 2 gems to pass, generates 45 bits and 8XP
3rd pony (2-star pony) bonus : 250 bits