The promise of HTML5's <video> tag was a simple one: to allow web pages to contain embedded video without the need for plugins. With the decision to remove support for the widespread H.264 codec from future versions of Chrome, Google has undermined this widely-anticipated feature. The company is claiming that it wants to support "open codecs" instead, and so from now on will support only two formats: its own WebM codec, and Theora.
Google's justification doesn't really add up, and there's a strong chance that the decision will serve only to undermine the use of the <video> tag completely. This is not a move promoting the open web. If anything, it is quite the reverse.
The <video> tag in HTML5 has been contentious since its inception due to question of codecs. Should the HTML5 specification mandate support for specific codecs, and if so, which should be required? Originally, the specification chose a particular compression algorithm for the <video> tag: the Theora algorithm. This decision was opposed by many parties involved in web standards for a range of reasons; as a result, the language of the specification was changed, so that it avoided specifying any particular algorithm. While this didn't make everyone involved particularly happy, it allowed work on the specification to proceed without endless arguments about video codecs. Though some opposed the decision, in truth it was hardly unprecedented: the HTML specification for the preexisting <img> tag for embedding still images does not mandate any particular format, either.
This meant that it was up to different browser vendors to pick their own preferred codecs. Apple and Microsoft (for the as-yet unreleased Internet Explorer 9) picked H.264 and H.264 alone. Firefox picked Theora and, in Firefox 4, WebM. Until this latest announcement, Chrome supported Theora, WebM, and H.264; in the future, it will support only Theora and WebM, just like Firefox. The reason Google has given for this change is that WebM (which pairs VP8 video with Vorbis audio) and Theora are "open codecs" and H.264 apparently isn't.