YouTube for Apple TV uses H.264, not Flash [Updated]
iLounge spoke with Apple's Vice President of Worldwide Mac Hardware Marketing, David Moody, who provided more details about this upgrade.
According to Moody, not all of the Youtube catalog will be available on day one. Instead, "thousands of videos designed for Apple TV" will be available at launch, but that the remainder will become available by the fall. The reason for the delay is that Youtube will be encoding all of their videos into a "H.264 streaming-efficient compression format" specifically for the Apple TV. All of Youtube's videos are currently encoded in Flash Video (FLV) format.
While no official reason is given for the mass transcoding of Youtube's entire catalog, Macformat.co.uk believes it has to do with the iPhone.
As far as I know even now, Flash content per se might not play on the iPhone from day one. But Apple clearly doesn't indeed, shouldn't care, as YouTube is for many people the most critical site that uses Flash.
Indeed, both the iPod and iPhone can play H.264 encoded video, and so it seems the entire Youtube catalog may also become available to those devices later this year.
Updated: In an early iPhone FAQ, Jobs described this exact scenario:
Jobs: Well, you might see that.
Markoff: What about YouTube
Jobs: Yeah, YouTubeof course. But you dont need to have Flash to show YouTube. All you need to do is deal with YouTube. And plus, we could get em to up their video resolution at the same time, by using h.264 instead of the old codec.