Got a Tweet from Loic Le Meur saying that YouTube have upgraded the quality of their videos/videio player. Great stuff, there is nothing worse than watching an awesome video of big squares flying around.
Here are some screen shots from Loic's HQ video posted, in Low (on the left) and High (on the right) quality for comparison (click to enlarge):
Great improvement! You can switch to High Quality (where available) by clicking "View in High Quality" under the player.