Why is this important?
In short, one word - convergence.
H.264, or AVC (Advanced Video Coding), is the scalable video compression component of MPEG 4 (Part 10) and the core of HD media like Blu-Ray and HD-DVD. This is the first public version of Flash Player 9 to include support for H.264 HD video playback, which means we could be seeing HD video at 1080P on YouTube and everywhere else in the near future. Along with the H.264 video support, Flash Player 9 also supports High Efficiency AAC (HE-AAC) audio encoding, the same audio encoding format used by iTunes.
In the clip below courtesy of Beet.TV, Bill Joll, CEO of ON2 Technologies helps put HD playback within Adobe Flash Player into perspective. On2S Supports H.264 as HD Flash Comes into Focus.
Tim Siglin - Flash Media Server Spawns a Family
Scott Gilbertson -Flash Player Update Adds HD Video Support
Ryan Stewart's Blog - Flash H.264 support and new pricing/availability for Flash Media Server 3
Adobe Flash Player 9 is immediately available as a free download for Windows, Macintosh and Linux platforms from www.adobe.com/go/getflashplayer. To learn more about Adobe Flash Player 9, please visit www.adobe.com/products/flashplayer/.