YouTube's goal is to make the site's vast library of content available to everyone, and that requires a fairly low-bitrate stream; however, the service is testing a player that detects the speed of the viewer's Net connection and serves up higher-quality video if they want it. This according to a Cnet report by Rafe Needleman.
Chen told Cnet that he expects that high-quality YouTube vids will be available to everyone within three months.
Chen also confirmed that in YouTube's internal archive, all video is stored at the resolution the users submits it in. That being said, a large portion of YouTube videos are pretty poor quality to begin with (320 x 240). Streaming these videos in high-quality mode isn't going to improve things much.