My understanding is that the first film shown on a plane was on a pleasure trip around Chicago in 1921, and the first in airline service was Imperial Airways UK to France in 1925.
My choice of IFE is good classical or jazz on headphones while watching moving map or film/tv on seat-back screen and looking out of the window, when possible. Some planes' systems (e.g. Virgin 747) allow the picture to be on while the radio plays.