With its purchase of the On2 video compression technology company having been completed on Wednesday February 16, 2010, Google now has the opportunity to make free video formats the standard, freeing the web from both Flash and the proprietary H.264 codec.

Ever since Google announced its purchase of video codec company On2 in August 2009, there's been an expectation that On2's VP8 codec would someday be open-sourced and promoted as a new, open option for HTML5 video. An open VP8 would offer comparable quality to H.264, but without the patent and royalty encumbrances that codec suffers.

In an open letter to Google, the Free Software Foundation suggested that the software giant freely release the VP8 HD video compression format after having acquired the On2 video technology firm.

Google has taken a swashbuckling step towards open and license-free web video by open sourcing the leading codec from On2 Technologies, the video-compression outfit it acquired earlier this year for $124.6 million.

The announcement of Google's new WebM video format and release of the VP8 video codec as an open standard have been hailed by some as the move that will free the Web from the proprietary H.264 codec widely used for online video today and favored by Apple (AAPL) and Microsoft (MSFT).

Sun Microsystems is setting out to create an open source, royalty-free video codec. Given the considerable head start of well-known, royalty-free video codecs like Dirac and Theora, you might ask why the world needs another. The answer, according to Sun, is the process the company will use to develop it -- starting with a full-on, careful examination of the patent situation.

One week after Google open sourced its $124.6m VP8 video codec, Mozilla and Opera have called for its inclusion in the still-gestating HTML5 specification. As it stands, the HTML5 spec does not specify a video codec. Browser makers are free to use any codec they like, and the big names are split between the patent-backed H.264 and the open source Ogg Theora.

As you probably know, a Google I/O conference was held today and a lot of blogs said they will announce big things. And big it was: Google officially announced the release of an open source, royalty-free video format called WebM which will be using the VP8 codec Google aquired from On2 as well as Vorbis audio.

Google has added an experimental branch to the VP8 code tree, encouraging developers to begin work on the next incarnation of its newly open sourced video codec.