The mobile version of Google’s video-sharing website received an upgrade Thursday. The new has a bunch of new features, including high-quality video playback in the browser using HTML5.

Surf to YouTube’s mobile site with any modern mobile with a browser that supports HTML5’s <video> tag (works great on iPhones, iPads and Android phones) and you’ll notice that when you click on a video thumbnail, the video loads inside a new browser-based player.

The old site on an iPhone used to launch the YouTube native app, taking you out of the browser. In fact, the first time you visit the site on an iPhone, you’ll be prompted to “install” a bookmark on your home screen. This is likely a step to move people away from the YouTube iPhone app and toward the web-based app.

The switch to an HTML5-based mobile experience comes only a week after YouTube published a public memo stating several places where HTML5 falls short when compared to Flash for delivering video. But Flash currently isn’t an option on mobiles. So, while HTML5-based video playback may not be YouTube’s first choice on the desktop (even though the company has been experimenting with it), it makes perfect sense on mobiles.

The whole mobile YouTube site has been optimized for the small screen, and the experience on the phone is now much tighter. For one, the video quality is markedly better, and the web-app’s interface has been updated to look like a native app, with big, touchscreen-friendly button icons.

There are also new features that aren’t in the YouTube iPhone app. The library is easier to navigate, the search box suggests results as you type, videos can be bookmarked like web pages, and favorites and the new “like”-style ratings have been added.

The mobile site defaults to H.264 playback, which is curious since Google recently helped launch the new WebM video project. WebM, which is already enjoying support in browsers from Opera, Microsoft, Mozilla and Google, is intended to provide an open source alternative to H.264 (and possibly even a recommended standard) for video on the web. But it’s not too surprising, considering that H.264 is more widely supported than the brand-new WebM on mobiles. And given Apple’s loyalty to H.264, which is the native format in QuickTime and iTunes, the chances are slim-to-none that Mobile Safari or Safari will support WebM in the near future.

Here’s where web apps win — If Google were to decide to start serving both flavors of video, it would just be a matter of throwing a switch. YouTube can add whatever features it wants much more quickly, since it just has to update a website instead of a native app that requires a download.

Watch the video demo starring some soccer player guy using both an iPhone and a Nexus One: