VP8 is a video codec originally developed by On2 Technologies, and later acquired by Google when they purchased On2. A short while later, rumors began spreading that Google was planning to make VP8 a free-as-in-freedom (libre) codec and implementation. This came to fruition via the announcement of the WebM Project (we talked about it here).
In short, VP8 is the video portion of the WebM Project, which itself is web standard for multimedia distribution, in conjunction with Vorbis for audio and using a subset of the Matroska format as a container.
One of the claimed advantages of VP8 is an optimization for embedded devices. As it is relatively new compared to other video specifications such as Theora, Dirac, and H.264, the quality of current implementations may not be representative of the format’s final prowess.
The WebM Project is showcasing VP8 via YouTube, which can be viewed using a WebM-compatible browser. More information about VP8 & the WebM standard can be found at the WebM Project website.