When Flash first incorporated video in version 6, they chose the “Spark” Sorenson 3 codec. A good choice, that was the best encoding quality at that time. In the following years, several companies developed encoding algorithms that were clearly higher quality.
Flash 8 then added the On2 VP6 codec, which again delivered higher quality at lower bandwidth.
Because of so many viewers had the Flash plugin, a couple years ago web video encoders found they could encode video into Flash rather than the triplicate of the past (Windows Media, Real, Quicktime).
But with the release of the H.264 standard there was still one more shoe to drop. H.264, as we predicted when we first saw it, will become the standard for web and DVD encoding, due to its unprecendented quality and low bandwidth. Apple talked YouTube into re-encoding videos into H.264 for compatibility with the AppleTV and iPhone.
Adobe has now announced that Flash will handle H.264 video, allowing web encoders both the advantage of the highest possible quality and compatibility with the widest number of viewers on all three platforms. Flash will also play AAC audio, a higher quality codec than MP3.
Adobe is smart- Flash is still everywhere on the web, but if they took a course of ever more proprietary non-standards, Flash would eventually go the way of Real and Windows Media- still out there but I doubt we’ll see any in a couple years. This keeps Flash as a good choice, often the best choice for authoring rich media web experiences.