The way it works is connect the television in your living room to the transmitter, and the TV in the bedroom to the receiver. The signal travels through the open air, and is decoded by the receiver in the bedroom. My advice is to have the transmitter and receiver in as open a space as possible to avoid any interference.
Line of sight is a term used for wireless transmissions. This is where the transmitter and receiver can see each other. This is also the best way to transmit. An example of line of sight would be listening to FM radio and losing the signal when traveling in a long tunnel or driving between two large buildings. At this point, the transmission tower can not 'see' your car antenna, which is why your signal was lost.
Another issue with wireless transmitter and receivers is concerned with high definition programming. Right now most AV receivers are built for 20th century technology. They are not outfitted with digital connections yet at the consumer level. The only one I could find with a component interface was RCA's PureAV model. This model is about $500.
I was able to review Terk's LF-30S model last year. It is a low cost AV transmitter and receiver. It works good but keep in mind that it is not a fit for digital TV transmission.