Some of you may have already noticed that your Hangouts video looked significantly clearer the last time you fired it up. That's because Google has transitioned from the H.264 video codec to VP8, and with it, the company has introduced HD streaming. Google started rolling out the change to users in the last few weeks, but it will still be a while before this rolls out to everyone.
Google introduced VP8 back in 2010 as an open and royalty-free format allowing users to watch video in browsers without the need for any additional plugins. Google asserts that streaming HD streams to ten participants using the H.264 codec would have required too much processing power. Using VP8 allows them to stream higher definition streams at lower bit rates.
The industry is moving towards adopting WebRTC, an emerging standard that would allow users to launch video chats in the browser without the use of apps and plugins. Google isn't the only company to push for the new technology, but it has integrated the necessary bits into the desktop and Android versions of Chrome. It's no secret that Google wants Hangouts to utilize WebRTC, but the standard needs more time to mature before the transition can be made. Some functionality, such as the effects that Hangouts allow users to apply, don't yet work with it.
But that's all long-term. As for now, your decision to purchase that HD webcam is about to be re-validated. And if the functionality hasn't already rolled out to you, just to be patient. It's coming.