Google rolled out a new Labs feature that allows you to preview new "video chat" features before they're turned on for everyone. "Visit the Gmail Labs tab under Settings, turn on "Video chat enhancements," and right away, you'll see higher resolution video and a bigger video chat window.
The higher resolution video uses a new playback mechanism which enables widescreen VGA and frees up valuable resources on your computer. For it to work, both you and the person you're chatting with will need to have the lab turned on. Remember that you can always revert to standard video chat by disabling the lab," explains Google.