As several sources report, Google Hangouts in soon arriving in High Definition. This feature is gradually rolling out to users, and is a step closer towards the switch from H.264 to VP8.
*29.10.13 Update! HD hangouts available to all users across all devices.
As first mentioned on Gigagom, the 720p HD resolution has been rolled out to several users. So if you've been seeing your friends in higher quality than you used to, you might have been among the first upgrades to the new hangouts.