Video format for IPad 3

What video do they play on Retina?
Is it HD?
or is it 2048x1536, same as the retina resolution?
Does the IPad have the required muscles to smoothly play HD movies, with the mbps that we produce them, or is it limited to the YouTube bandwidth?

I play mp4 1920 x 1080 videos on mine. I think a stock video formatted .mov would not play out without jitters as well as using most of the ipads memory. A mp4 file straight out of the GoPro plays fine on the Ipad 3 as well as a full HD.mov file out of my Canon 550d.

Birkley, the HD is smaller than the frame of the IPad. What happens in the unused area?

black border top and bottom

Are there any movies in the 2048x1536 resolution out there?