At the rate this little tip has been circulating the interw3b, it won’t be considered “secret” for long. In preparation for what I hope is a global upgrade of all their content, YouTube has already converted many of their videos to a higher-quality 480×360 version.
Try this: When viewing a movie on YouTube, add &fmt=18 to the end of the URL. In addition to slight video improvement, you should also notice increased audio quality. Notice I use the word “slight.” I hope YouTube goes further than this humble baby step towards something more like Vimeo’s level of quality.
There’s also a Firefox extension that supports higher-quality YouTube playback (among a list of other enhancements).
For the full scoop, including tips on embedding high-quality YouTube clips, check out this Wired post.