The folks at SRI explain the magic behind the video image stabilization that is to grace Google Talk on your Android Honeycomb slate:
"Video chat applications capture video from the front-facing camera on smartphones and tablets. Once an image is acquired by a camera, it is compressed before it can be transmitted. In video compression algorithms, the bandwidth used to encode the video increases with the amount of motion in the scene.
So besides less jerky videos. we'll be getting ones that hog less bandwidth - hopefully that will help with video chats over slower 3G connections. As for the whole image stabilizing thing, we haven't seen a software solution that can beat a good optical image stabilization, but we'll spare judgment for until we see the results SRI and Google have arrived at.
source: SRI via Ubergizmo