The background is that in previous versions of Windows, only 1 application was able to access a webcam at any one point. This release introduces a service called Windows Camera Frame Service. The idea is that all applications will be able to access the webcam at the same time. This is particularly useful for the new authentication methods Microsoft have been advertising on the TV.
To introduce this service, Microsoft had to turn off compression of the webcam stream to stop the inevitable CPU increase of a bunch of different applications all trying to uncompress the stream at the same time.
The downside of this is that most USB webcams and even integrated cameras are connected using USB2 interfaces which can only transmit 480MB/s. Using compression allows HD to flow quite freely over USB2, but turn off compression and you have a big problem. The above registry key disables this new mode.