Just to add some flesh to the bones, there are essentially 2 ways to watch video on the net, downloading which means the video is transfered from the site to your PC's hard disc and then you watch the file from there, or streaming where the video is sent to the PC as a stream.
The benefits of each are that with a download once it's finished you can watch it whenever you like and as many times as you like, but you can't normally watch the video as you download it.
With a stream you watch in real time, however you have to watch it there and then.
However with the web you might not get a constant speed and there can be some down time, therefore when streaming the software will buffer (store) stuff in the future so that when speeds drop or there is a problem it can read from this to stop interuption.