The speed with which data is transmitted is measured in bits, and is known as the bit rate. In general, the higher the bit rate, the higher the quality.
Video can be encoded in two ways – with a constant bit rate (CBR) or with a variable bit rate (VBR).
Constant Bit Rate is frequently used for streaming video (for instance, You Tube) where it is important to control both the size of the file and the amount of data that is transmitted.
Variable Bit Rate is used where quality, rather than file size, is the main concern, and where unpredicable transmission speeds will not be an issue. A DVD movie is usually encoded at a Variable Bit Rate.
You can further affect quality by having One Pass or Two Pass encoding. In one pass encoding, the content is encoded immediately. In two pass encoding, the content is analyzed during the first pass, then encoded during the second pass. The quality of two pass encoding is higher, but the time required to encode a clip is doubled.
As you can see, in theory the best quality videos will be achieved with two pass, variable bit rate encoding. However, the time required to make the video, and the size of the file may make such encoding impractical. In additon, when a video with a very high bit rate is streamed over the web, a slow connection speed or an inadequate video card or memory in the viewer’s computer can make the video appear jerky as the computer struggles to keep up with the amount of data being streamed.
So – with current technology – when you make a video for You Tube, it is usually best to encode it using single pass constant bit rate, even though it may mean sacrificing a bit of quality.