The H.264 Announcement in Black and White by Ryan Stewart

Does the addition of H.264 mean Flash Player will support HD? Yes, Flash Player supports 480p, 720p and 1080p content encoded with either On2 or H.264. Performance will vary depending on the capabilities and configuration of your machine. In general a 2.0 GHz Mac or a 3GHz PC, with one or more processors, will deliver an optimum experience.

Will Flash Player 9 Update 3 support non-FLV files? Yes, with this update, Flash Player will also support MPEG-4 standard container files that contain video and audio data encoded using H.264/HE-AAC, including MP4, M4V, M4A, MOV, Mp4v, 3gp, 3g2. So basically you can play full, hardware accelerated 1080p Quicktime videos inside of the updated Flash Player. Welcome to the next generation of web video.

More detail: What just happened to video on the web?