Youtube watch in normal/high quality

Anybody noticed the watch in normal/high quality link that is present in the bottom right corner of some videos in www.youtube.com?

The funny thing is that in some videos where the streaming delays while watching it in normal quality, it works perfectly in high quality. The only thing I could assume is that the videos are stored in high quality and are converted to normal quality on-the-fly instead of being stored in both formats.

This makes the option pretty useless.