- switched to the new iframe/HTML5 code, which enables hardware acceleration in more cases than the old code
For acceleration to work you need updated browser and updated flash player. Updates are very important, because older versions either had bugs or didn't support it. Then you need hardware which is capable of acceleration. Get new flash player here:
http://get.adobe.com/flashplayer/?no_redirect . Everything was tested with Adobe Flash Player 10.3.183.10.
Then, when video is playing right-click on it and select "
Show video info", it should say "
accelerated video rendering,
accelerated video decoding", or at least "software video rendering, accelerated video decoding", which is the default for YouTube. So, if you watch videos here, you can get better acceleration than most YouTube users.

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This is NOT required, but it may improve browsing even further:
Chrome - go to aboutflags or chrome//flags/ and enable "GPU compositing on all pages" and "Override software rendering list" may be needed on some systems. "GPU Accelerated Canvas 2D" should be enabled by default. IE9 and Firefox (latest) also should enable acceleration by default.