M2V is a video-only ((packetized) elementary stream) MPEG-2 file (
wiki entry for M2V), usually created from a MPEG-2 encoder program like TMPGEnc or Cinema Craft Encoder. It is then (typically) loaded into a DVD authoring program along with the accompanying audio file(s), subtitle file(s), and other video (for angles), in DVD creation/mastering.
If you demux a MPEG-2 file such as a VOB or MPG you will end up with a M2V video file and an audio file of some sort (AC3, MP2, WAV, DTS, etc.)
Most video players will play back the M2V files, but almost all do not register the M2V extension. In fact, all the MPEG-2 capable programs I currently have on my computer have not registered the M2V extension (Winamp does, but I'd rather not have it handle video files. Same thing with MPC, at least not by default (don't ask why, I have my reasons)). The files will play in Nero Showtime, Media Player Classic (with sound if the audio file has the same name), VLC Media Player, PowerDVD 4.0 (but not 5.0 for some reason), and Winamp. RealPlayer (installed on my older computer) will play it, but with the wrong aspect ratio. Magix Movie Maker Pro 10 and NeroVision Express 3 will load up the M2V video file for editing.