The company is providing more information about this decision in two related blog posts:
Greater Interoperability for Windows Customers With HTML5 Video
We believe that Windows customers should be able to play mainstream HTML5 video and, as we’ve described in previous posts, Internet Explorer 9 will support playback of H.264 video as well as VP8 video when the user has installed a VP8 codec.
H.264 is an excellent and widely-used video format that serves the web very well today. As such, we will continue to ensure that developers and customers continue to have an optimal Web experience.
Setting aside the speculation about the reasons and objectives, this [Google] announcement has created instability and uncertainty around video on the Web. To get back on track, technical enthusiasts, developers, businesses, and consumers need consistent and sustainable answers to many questions about [Google's] WebM [video format].
Microsoft’s Point of ViewAny browser running on Windows can play H.264 video via the built-in Windows APIs that support the format. Our point of view here is that Windows customers should be able to play mainstream video on the Web. We’ve provided Windows 7 customers who choose to run Mozilla Firefox an add-on to enable playing H.264 video on Web pages with the HTML5 video tag. Today we’re making available a similar plug-in for Google Chrome.
Our point of view is totally clear. Our support for H.264 results from our views about a robust Web and video ecosystem that provides a rich level of functionality, is the product of an open standards process like the W3C’s HTML5 specification, and has been free from legal attacks. Microsoft is agnostic and impartial about the actual underlying video format for HTML5 video as long as this freedom continues.