[W]ith the read/write Web comes a whole new set of challenges. As we begin to share one another’s content like never before, it is not enough to ensure that we don’t upload content that might be infringing, but we have to make sure that we don’t use infringing works posted by someone else.
As the article discusses, you're not protected from direct infringement liability simply because you're embedding a clip available on a video hosting site, and such sites (YouTube is the example in the article) generally have express disclaimers as to intellectual property issues relating to use of material hosted there. While going after small site holders who have perhaps accidentally embedded infringing videos would not be a popular move, it might actually be an effective strategy in the Viacom, etc., v. YouTube drama. If lots of John Q. Bloggers were pursued for embedding works they found on YouTube, the backlash against YouTube for making that possible could be considerable, despite YouTube's on-point disclaimer.
All of which underscores the need for group/collaborative bloggers to have clear understandings with one another. When someone's casual embedding of a YouTube video can subject the site to a potentially whopping damage award, co-bloggers should think hard about having everyone 1) agree to be solely responsible for their own submissions, and 2) represent and warrant to one another that they have the rights and permissions to use what it is they're posting. The same holds true for blogging networks and their bloggers, temporary guest bloggers, etc.
[Update, 07/10/07:] Internet/IP law guru and EFF superstar Fred von Lohmann responds to the Blog Herald article that an embedded video or image is "a link. Just a link. Nothing but a link," and as such could trigger at most a claim for contributory infringement. (Fred also discusses how one can limit exposure for that sort of liability under the DMCA's safe harbor provisions.) I certainly hope Fred is right that courts confronted with the issue will be inclined to analogize embedded videos to the "bottom half of the screen," full-sized image viewable inline linking analyzed in the Ninth Circuit's Perfect 10 v. Google decision. It's important to remember though that Ninth Circuit decisions may be persuasive, but are not binding, on other Circuit courts or the U.S. Supreme Court, and that even the Perfect 10 "server test" analysis of direct infringement of the display right focused heavily on whether full-sized (or essentially so) versions of the work could be "perceived" or "otherwise communicated" from the conduct in question.