The newest flash player, released in December, supports the H.264 codec. H.264 is NOTICEABLY better than the On2 or Sorenson Spark Flash codecs.

The only downside is that people will need the newest flash player, which a lot of people don't have, to be able to view h.264 encoded videos. But if you're comparing with other sites that look noticeably better, that is most likely why.