<source> lets you serve different formats of the same audio/video object to accommodate the different formats your users may need. However, <source> doesn't do anything to help you figure out which formats you need to serve to cover your user base, which is the problem being referenced here, I believe.

In theory (only) this doesn't help web designers much, as they still need to keep supporting the same formats.

In practice, web designers already seem to use H264 exclusively, so at the very least Firefox users won't have to install Flash to see videos.

Ironically, I've been pretty happy that Firefox on Android has been raising a video-viewing Intent, since I like the option to use one of my locally-installed video players. I hope they'll keep an option to do that even after they've integrated support for system codecs.