This is a good move for all involved. The real news has nothing to do with "high definition".
The problem with Flash video is that up to now it has been based on proprietary standards. Most popular video standard on the web today, but locked-up in a proprietary standard, with limited third-party support.
The only free open-source third-party software available for the existing (FLV) format works with only an older version of the codec. This will open things up considerably, allowing webmasters to use a large variety of third-party tools for most every aspect of video preparation and serving.
One problem yet - the updated Flash will not accept MPEG4 video streams from a non-Adobe streaming server. You can still serve videos using "progressive download" from your web server, but it won't stream as smoothly, won't have the ability to skip forward (unless already downloaded), etc.
So, while Adobe has opened things up, they are still trying to lock users into their expensive media servers.