H.264 is "open" in the sense that the specifications are public, anyone can write their own implementation and a level of backward compatibility is warranted. This is in contrast to flash or real where the specifications are controlled and adobe can change them at any time so that a new version of flash may make all third party players incompatible at any moment (although adobe is opening the flash specs as we speak, so flash may also become "open").

H.264 is not "free" because it is covered by various patents. But those patents have been organized in patent pools with clear and non discriminatory licensing conditions.


So in practice, there are 3 types of specifications:
-"closed", third parties have to reverse engineer the specs, they may be sued at any moment for patent infringement, compatibility may be broken at any moment.
-"open": third parties can get a description of the specs, patent licensing is easy and non-discriminatory, a good level of compatibility is insured.
-"free": same as "open" without the patents and the costs.


As to Apple and youtube: youtube is owned by google. Both Apple and google have interest in the web using "open" standards, so it is not as if it was an exclusive deal for the iPhone. And market share, whatever that means, is not the only criteria. What is best from a business point of view:
-investing money for you site to be viewable by 10 millions people, of which 99% will not bring any revenue or
-investing money for you site to be viewable by 1 million people, of which 50% will bring revenue?

This was always the problem with Linux users: they are not a good market target (they want everything to be free...), unless you sell computer hardware maybe. On the contrary, the iPhone (and Apple computers in general) are bought by people obviously having money and ready to spend a little more for good design and ease of use. They are a very attractive market target.