The spec sheet mentions h.264 high profile decoding, but does not mention level. Level 4.1 would cover most video commonly available (720p60, 1080p24 and 1080i60), including Blu-ray content. Level 4.2 would extend this to 1080p60, rarely found natively (usually only encountered when playing back raw full-screen captures), but useful when deinterlacing 1080i. Level 5.1 would allow playback of 3D content, but the requirements of essentially playing back two level 4.1 streams concurrently are probably too onerous for an embedded platform of reasonable cost.
Level 4.1 or 4.2 would definitely be the sweet-spot for playback of all but specialised video, and would almost instantly make the RaspberryPi the media streamer of choice (for those willing to solder on an IR receiver, that is). A cursory google only turned up ARM11 SoCs with Level 3.1 support at high profile though, so even level 4 support (1080 playback, but not directly from Blu-ray) might be pushing things.