It is at about the same place as film making was in the early 1900s. No standards, everyone doing something different, every movie made by experts with *their* camera and process. Not even the theaters were standard. And no one had figured out how to make long movies. People would pay a nickel to watch a 'flicker' in a nickelodeon.
Look at the very best of web video today, and you see elegant trailers and advertisements, usually under 2 minutes. When you start to make web video think small, think simple, think movie trailer. Avoid special effects, because they take up bandwidth and bring your movie to a stop.
Expect to spend some time figuring out how to prepare your movie for the web. You can use QuickTime, Windows Media 8, or RealProducer to generate a web movie 10 minutes from now -- if you are not concerned with quality. Just use the default settings.
However, if you look at the best web video, like the movie trailers on the Apple QuickTime site you may be disappointed with the results of your video. And, as soon as you start trying to get good quality, things get difficult.
The great difficulty is bandwidth. However, I think high speed connections (DSL, Cable) are going to go in faster than anyone anticipates. Lake County, a rural county 100 miles north of San Francisco, already has a high percentage of cable modem connections.
To get an idea of the potential of broadband, consider the economics. A cable modem connection offers a high quality, high speed internet connection at the same cost as the alternative -- a dedicated phone line connected to an ISP.