Adobe today pushed an update that enabled H.264 hardware decoding in Flash 10.1. It only works on certain newer Mac’s and there are an assortment of caveats in which Flash will revert to software decoding according to a Flash Engineer.
I’ve only played with it for a few minutes on my Core i7 MacBook Pro, and things seem very speedy and my CPU didn’t see much of a spike. Hopefully enough videos will take advantage of hardware decoding that this will be a nice improvement.
I still believe WebM is the better future, but H.264 hardware decoding does make Flash less painful for the moment.