Note: below is nothing but my own opinion as a developer of video-related Mozilla code!
My LCA talk on Friday was about why open video is critically important to free software, and what Mozilla is doing about (plus a discussion of the relationship between Web standards and free software in general). Little did I know that Youtube and Vimeo would pick the day before my talk to cast a glaring spotlight on the issue!
Youtube and Vimeo have started offering video playback using the HTML5 <video> element. That is good news for free software, since it means you don't need a closed-source Flash player to play the video . However, they only offer video in H.264 format, and that is not good news for free software. A lot of people have noticed that Firefox doesn't support H.264, and apparently many people don't understand why, or know what the problems are with H.264. This is a good time to restate the facts and re-explain why Firefox does not support H.264. I'll be mostly recapitulating the relevant chunks of my talk. (Hopefully a full recording of my talk will become available from the LCA site next week.)
The basic problem is simple: H.264 is encumbered by patents whose licensing is actively pursued by the MPEG-LA. If you distribute H.264 codecs in a jurisdiction where software patents are enforceable, and you haven't paid the MPEG-LA for a patent license, you are at risk of being sued.
So why doesn't Mozilla just license H.264 (like everybody else)? One big reason is that that would violate principles of free software that we strongly believe in. In particular, we believe that downstream recipients of our code should be able to modify and redistribute it without losing any functionality. This is freedom that copyleft licenses such as the GPL and LGPL (which we use for our code) are intended to ensure. It is possible to obtain patent licenses in a way which works around the letter of the GPLv2 and LGPLv2, but honoring the letter while violating the spirit is not a game we are interested in playing.
But aren't there (L)GPL implementations of H.264? Yes, but they're not as free as they appear. Their freedom has been silently stolen by patents (in jurisdictions where those patents exist and are enforceable). The software license permits you to redistribute and use the code, but the MPEG-LA can still stop you. 
But the MPEG-LA won't bother suing me or my project, we're not worth bothering with. Perhaps true, but I hope "remain irrelevant" is not the favoured strategy for most free software projects. It's certainly not an option for Mozilla. If we hadn't distributed Firefox to tens of millions of users --- legally --- it probably wouldn't be possible to browse the Web today using anything but IE on Windows. Plus, relying on selective enforcement is rarely a good idea.
Mozilla should just ship without licensing as a civil disobedience measure. That might be fun, but I expect an injunction would quickly force us to disable H.264 and send a hefty damages payout to the MPEG-LA. That's not a win.
Mozilla should pick up and use H.264 codecs that are already installed on the user's system. I've previously written about a variety of reasons this would be a bad idea, especially on Windows. Really there are two main issues:
- Most users with Windows Vista and earlier do not have an H.264 codec installed. So for the majority of our users, this doesn't solve any problem.
- It pushes the software freedom issues from the browser (where we have leverage to possibly change the codec situation) to the platform (where there is no such leverage). You still can't have a completely free software Web client stack.
But I could just download gst-plugins-ugly and I'd be OK. That's a selfish attitude. Everyone should be able to browse the Web with a free software stack without having to jump through arcane hoops to download and install software (whose use is legally questionable).
The H.264 patents will expire soon, and then we'll be OK. Many H.264 patents don't expire until 2017 or later. Anyway, H.264 isn't the last word in video compression. There will be an H.265 and the same set of problems will persist.
Users just want video to work. You Mozilla people are such idealists! Yes, that is the reason for Mozilla to exist. Anyway, in the short term, our users probably won't be affected much since Flash fallback will still work. In the long term, I think freedom will ultimately benefit users (not just Firefox users, but all users).
Apart from the issues with H.264 support in clients, there are also huge issues around H.264 for Web authors and content providers. Currently providing H.264 content on the Internet is zero-cost, but after 2010 that will almost certainly change. A couple of good articles are here and here. We won't know much about the terms until the end of this month. The key issue is not exactly how much it will cost, but that if you want to publish H.264 you will probably have to hire lawyers and negotiate a license with the MPEG-LA. If you just want to put a few videos on your Web site, or add a help video to your Web application, or put a video cut-scene in your Web game, that is probably not something you want to do. Web video is not just about Youtube; mandatory licensing would cripple the use of video on the Web. (Just imagine if we had such a regime for still images...) Even if there were no patent issues on the client side, this would still be a good reason for Mozilla to push for truly free codecs.
The honest truth is that none of us know how this is going play out. The proponents of mandatory licensing are strong, and most people don't care about software freedom. We're doing our best to make Ogg Theora rock, and I don't know what else we can do directly right now except spread the word and help people understand what's at stake here ... hence my LCA talk, and this blog post.
 Yes, I know gnash and/or swfdec might play these videos, but in general they are not able to keep up with the latest Flash APIs offered by Adobe and used by major sites. Anyway, it's good to not have to play that game.
 RANT: in many cases, free implementations of heavily patent-encumbered technology are harmful to the free software ecosystem, for two reasons: people are confused into thinking they have rights that they actually don't, and thus these implementations can discourage the adoption of alternatives that are free for everyone.