John Battelle’s blog has the whole story:

I’ve confirmed that Monday Google will launch an in-browser video playback feature based on the open source VLC media player. This is the logical next step for Google’s video search and upload function, which began taking uploads from anyone who cared to submit back in April.

Google will not disclose the raw numbers of videos that have been uploaded to date, but the company will make all those which were tagged as “free” available for real time streaming through the VLC player, which Google has modified and will make available for download Monday morning. The company also intends to make its VLC code available to the open source community as part of their Google code project.

This is big. Mr. Battelle goes on to theorize that this is a shot against Microsoft in the coming war as Windows Media Player is a stand-alone app with it’s own DRM issues.

VLC is a pretty cool project. I’ve been using it on Linux and Windows since January when The Current launched so I could listen to the AACPlus feed. VLC does it all – video, music, streaming, server, it’s a pretty amazing piece of software and it will be very interesting to see what Google has done to it and how it continues to evolve.