The AirPlay symbol will appear automatically in the menubar when there's an AirPlay device it can play to. It could be that the iMac may be just too old for it to work. It needs to be the later half of 2011 for it to work. Leo also says to make sure Airplay is enabled in AppleTV.
The chatroom found an article that says there's a known issue with Airplay and Mountain Lion. Check it out here.
Chris, from Miami, calls in to say that it's a common issue and the bottom line is that the window for supporting Airplay is just too small. Leo says the video bandwidth requires a lot of power, that earlier Macs simply can't handle it, especially when gaming. Chris suggests people use AirParrot, which will do the same thing as AirPlay on older Macs. While that may work, the frame rate will go down with gaming.