Since the launch of YouTube, Flash has become the dominate video format.   The reasons are pretty simple:

(1) A higher percentage of people have Flash installed on their computers than competing formats like Windows Media Player or Real.  As of December 2006, 94.2% of folks in the US had at least Flash 8 installed on their computers. 

(2) Flash makes it easy to embed videos on your website.  Hence YouTube and the whole viral video craze. 

At this point I think it is safe to say that Flash is the industry standard for online video.  As a web development firm, we've started serving our videos in Flash almost exclusively.

I was interviewed for a story in Shoot Online a few weeks back on how Presidential candidates are using web video for their announcements (it is behind a pay wall now).  My contribution to the piece was pretty forgettable but an executive at Brightcove nicely defined the three ways you can do web (Flash) videos online these days:

(1) You can just post your video on YouTube for free and embed it into your site.

(2) You can build your own branded (or not) Flash player and host the videos on your own servers.

(3) You can host your videos using more feature rich hosting services like  Brightcove, Permission TV, Revver and Blip.tv.  Some of these services charge you, some don't. 

For me, #1 is out.  YouTube is great, but it is not appropriate for all videos.  The quality is kind of bad, their terms of service are a bit scary (see Ze Frank on this) and you don't have much control over the presentation of your video.  For me, YouTube is more of a distribution channel than a video hosting/player solution.  It can be used to complement options #2 and #3.

We've done option #2 plenty and even developed ways to include embed code in client-branded players.  We'll probably still do this for certain folks but it is sort of a pain.  I also feel like by doing this we are fighting a losing battle - our own branded players aren't able to keep up with all the cool features others are using. 

So basically we've settled on option #3 and are playing around with a variety of players.  Read/Write Web has a good breakdown of all the options.  The choices are sort of overwhelming and new features are coming out pretty much every day.  Channels available right in the video.  Embed codes within the video.  The ability to put your own ad or call to action at the end of the video itself. 

My current favorite is blip.tv.  It is easy to use, it has all the features I want, the player is unobtrusive and it will have the ability to embed my own ad at the end of the video in a few weeks. 

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