YouTube has announced that they will begin supporting 1080p HD video. The support will begin sometime next week.
Previously, the max HD resolution was 720p. Resolution for a given video will depend on the resolution on the source of the video. In other words, a video will need to be uploaded in 1080p to appear as 1080p on YouTube.
Videos that were already uploaded in 1080p are being re-encoded by YouTube.
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