Jan Ozer was quick on the mark to deliver a side-by-side comparison of video encoded with VP8 (the codec which Google open sourced as recently as two days ago) and H.264, the de-facto codec standard for web video and beyond.
You can check out Jan's tests here on streamingmedia.com but in summary it is safe to say that any differences in quality are negligible. What remains to be seen is of course how the same codecs perform across a range of bitrates; maybe VP8 does excel once you throw higher resolution, higher bitrate content at it? Or maybe it will distantiate itself at low bitrates?

But regardless, the mere fact that VP8 is open source now and that it is a serious contender in the codec wars that rage around the web in the past few months is a great thing. Remember that H.264 is a patent encumbered format with a patent pool overseen by an organisation called MPEG-LA, and license fees are payable for certain types of usage. It is the uncertainty about these fees and their possible future rise that give organisations like Mozilla cause for concern - and they are not alone. By open sourcing VP8 Google is obviously prepared to call the bluff of anyone who may claim to hold patents on which the VP8 codec may infringe. Now that the sources are open for anyone to see it is now possible to inspect them, and quite likely sue Google for patent infringement. Of course we don't know yet if that's the case, but I truly hope that this big questionmark will once and for all be cleared up by a court. Hopefully VP8 is either free of patent infringements or Google can strike agreements that shield anyone from being sued if they use the codec. No doubt the web would be a better place if we had a free to use, patent free, high performant codec available for everyone to use with no strings attached. Google is definitely up for it and saying: "Bring it on, whoever you are."

I'm sure Adobe is totally loving this, for various reasons :-)