I have always wondered how to do this. It's quite often I have directories full of media files (specifically music) and subdirectories within them also with music files, and though the manual for MPlayer is thicker than the Chinese phonebook I have not been able to find any option for it. I did however find a method which isn't exactly the guru one-liner, but here it is anyway. It's broken into two steps, the first to create a playlist, and then to play the playlist.
$ find -maxdepth 1 -type f -name \*.\* > playlist
$ mplayer -playlist playlist
Just add a -loop 0 suffix if you want to loop :)