Engagdet blogger Nilay Patel breaks it down:
There’s a crucial difference between “open” and “free” here. Although H.264 is an open standard, in that it was developed by a consortium of companies and anyone can make and sell an encoder or decoder, it’s not free — you’ve got to pay for a royalty fee to use it, and the rates are set by the MPEG-LA, which collects payments and distributes them to its members.
If you care about this subject at all, it’s worth the time to read it.