TechCrunch has a nice interview with the President of Encoding.com where they summarize the upcoming war on video formats.
One one side you’ve got H.264 which, according to Encoding.com, represents more than 90% of the videos they serve. On the other side you’ve got WebM (which is really VP8 with Vorbis for audio tracks), released just last year.
H.264 is patented, but the patent holder, the MPEG LA, announced in 2010 the use of H.264 will always be free for Internet end-users. But the terms of the license are re-evaluated every 5 years. Any commercial use of that codec is subject to pay the patent royalties fees.
WebM is patent- and royalties-free, but is technically very close to H.264 so Google might run into patent issues. Google released WebM under a license that doesn’t protect end-users or companies from patent litigation pursuits.
So basically the market is split between two uncertain choices. 2011 will probably be the year we hear a lot more about WebM, so stay tuned.