What's the difference? Without this little bit of code at the end of your video URL, YouTube will automatically choose the screen resolution for the video, anywhere from 240p all the way up to 1080, but usually in the 360p to 480p range. Ever noticed how sometimes videos of screencasts with words are blurry? If you add the little snippet of code above, YouTube automatically shows the video in HD, at least 720, and if it was recorded at a high enough quality, 1080p.
Want to see the difference? Check out this video I recorded using Snagit. For best comparison, click into full screen mode.
Youtube chooses the viewer - https://www.youtube.com/watch?v=Gn1RHOJ8kXQ
I force it to its highest screen resolution - https://www.youtube.com/watch?v=Gn1RHOJ8kXQ&hd=1&
(Similarly, if you are embedding a YouTube video into another website, you can force the embed to open in HD by adding ?vq=hd720 or ?vq=hd1080 depending on the resolution quality of the video you uploaded.)
Youtube chooses the viewer
I force it to its highest screen resolution