There's 2 sides to every story - I see this as a play from Google to try and push Chrome adoption. The people who made the (inferior) VP8 codec didn't do it for the joy of humanity, they made a bootload of money when Google bought them out. And Google isn't giving it away out of charity, it's a cheap way to win browser market share.
R&D is expensive, and from what I read it costs $0.20 to license a h264 encoder, which means those people who want to make commercial h264 video (be it from a camera, video editing software, etc) will have a massive $0.20 added to the price of their hardware/software package. Is it really that big of a deal? For the end users, it's business as usual - decoding is free.
There's an interesting article here
http://x264dev.multimedia.cx/archives/377 that Google (who knows nothing about codec making) has finalised the spec in a bad state, so it'll never reach h264 levels of quality in its current form, and is reluctant to change it. And it seems that VP8 is based on questionable work anyway, and Google might not be able to uphold their "patent free forever" promise due to circumstances under their control.
Whenever I see Google doing something these days, I often question their motives, because their "do no evil" mantra is tired and so obviously just lip service. As a consumer, I just want to use the best tech. The companies all love making patents, let them sort out all those $0.20 between them, don't bother me with the details, and just let me have the good stuff!
Edit: Why is Google being dickish about it anyway? This is only going to hurt end users. Why not go the route MS is going with IE9, and use ANY CODEC that's on the PC. A great solution would be a "you don't have the right codec. Click here to get it" in the video window. Billions of people have accepted this as a solution for Flash video, why not HTML5 video?