Between XVID and x264 in quality. Superior to Apple's h.264 implementation. Roughly equal to x264's baseline profile, but it cannot touch x264 main or high. For that reason, I'll still go with h.264.
I know the patent fiasco and so on, but I don't really care. MPEG-2, MP3 and so on are patented also, it doesn't stop us sharing them.
I think it'll just end up another format available to use. The average user doesn't know or care about the technicalities. Think PNG vs GIF, where GIF is h264 and PNG is WebM. H264 isn't going anywhere.