In the pre-HTML5 stage. We need a plugin or video container to play movie on the web. But what is the HTML5 doing, how can it play the video without any plugin?
What is the magic behind the process?
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Current browsers have the functionality to play video in certain formats, without requiring an extra plugin and few years ago all browsers needed a plugin that had to be installed separately.
One of the reasons html5 video took so long was/is software patents. A browser can be downloaded freely, but to play a video the browser maker had to pay a patent fee to the patent holder.
Today there's new video formats that do not require patent licensing. Google's webm is probably the best free codec/format at the moment for the web.
The html5 video tag just tells the browser that there's a video there and points to the video codec or format used.