The HTML5 option is only available for browsers that support HTML5 (obviously) and h.264. Safari (version 4 and above), Google Chrome, and Internet Explorer with Chrome Frame are a few of the qualified browsers.
There are a few caveats to the HTML5 beta. Videos with ads aren't supported (awww...) they'll play in the standard Flash player instead. There's also no support for full screen; clicking the little expander button on the lower right corner of the video will instead expand the video within the window to about double the normal size. Honestly, YouTube's full screen video has never impressed me much anyway, so this isn't a huge loss. Macworld notes that you also lose support for annotations and closed captioning, though, which might be a deal breaker for some.
Although YouTube is calling the HTML5 beta an "experiment," this is an experiment I'd encourage everyone reading this to take part in. While the pre-release of Flash Player 10.1 reduced Flash's CPU footprint considerably, using HTML5 instead results in a dramatic reduction YouTube videos played in Safari using HTML5 never used more than 15% of my CPU. Even compared to Flash 10.1, which generally used about 35% of my CPU, that's pretty tremendous.
One other thing I've noted in my brief experimentation with the HTML5 beta: the scrubber bar on videos seems far more responsive, without any lag at all. Flash videos were very jittery when switching between different spots in the video using the scrubber bar, but the response using HTML5 is instantaneous and seamless.
I hope YouTube's HTML5 beta is a smashing success. If the biggest video site on the internet eventually abandons Flash Player, it's only a matter of time before everyone else does, too. Personally, I can't wait.
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