This update adds some cool features which are particularly interesting in regards to Flash Video support. Those are (and I quote):
Multi-threaded video decoding. The VP6 video codec will now run in a separate thread if a multi-core system is detected which leaves the main thread to do rendering and post processing of the video. With this true 1080p video is now possible on most modern dual core machines. Also, the responsiveness is improved with this change. The Sorenson codec on the other hand did not get this change for technical reasons.

It gets better:
Full-screen mode with hardware scaling. Probably the biggest new feature in the Flash Player Update. This leverages DirectX on Windows and OpenGL on OSX. There is an new API to control the behavior which was required since we could not change current behavior and we wanted to give the maximum flexibility possible.

More info here on Labs and also a cool video interview with the Jedi Master Tinic Uro.