One should also be aware that some sites (Funny or Die comes to mind as one example) still prefer not to support H.264 encoding, in part because of the challenges it presents to getting consistent performance for all sorts of video and film styles, H.264 works remarkably well and efficiently to get high quality and smaller file sizes, but it works best when the video image only changes infrequently.
For example, if you shoot from a tripod, and most of your video is a long cut of yourself talking, or of a peaceful landscape, H.264 can do amazing things.
If your video clip looks like a scene from Cloverfield, on the other hand, you may see some artifacts in your H.264 encoding that may drive you a little bit bonkers.
But since so much of the "approved" content on YouTube consists of "talking head" vlogs, H.264 seems like the no-brainer solution.
For those still waiting to switch, I also suspect they've concluded that Adobe Flash's recent addition of H.264 support in recent versions of the Flash Player are just not entirely ready for "prime time." (That topic is something I may get into in more detail in some future blog entry).
I come from a somewhat biased place, since most of my editing and rendering experience has been in Vegas Pro and started with its consumer-oriented, slightly crippled siblings.
For most SD camcorders, AVI has long been the standard container format saved by most capture utilities that transform your taped video to a form that can be edited digitally. Perhaps I'll dig into one of those files one day soon and describe what you may find inside.
There are some standalone packages, many of them open source, that are mostly useful because they convert one or more video container types to a range of other types. In some cases that may be everything you need.
Since Vegas (and most NLEs) have transcoding and rendering modules built into them, I haven't really explored these packages deeply enough to have a strong opinion of them. It's best to find someone with a lot of working knowledge of these converters, to get a sense of their pros and cons, and whether they are something you need.
A lot of other video editing packages can do this as well, and there are at least some open source programs that will also create H.264 video which tends to be a little more important than whether the container is MP4 or another type (MOV, AVI, even FLV) as long as it can hold an AVC/H.264 encoded video stream.
Your choice should be based on a combination of budget factors, as well as how deeply you expect to get into editing and production.
If your time is more scarce than money, one of the commercial packages may be simpler to learn (and have more resources for training... plus, Vegas, FinalCut, or at the really high, Hollywood and Vancouver high, ends, Avid, are all tools widely used in film and TV production, (though Vegas has found it's niche more in local news and maybe cable ad production than it has found acceptance in features and among film school grads). You may find that your learned skills are somewhat more marketable, if you can claim intimate knowledge of one, and better yet, all of these programs.
I wound up gravitating to Vegas mainly because I already had a few years experience working/messing with the consumer-oriented package that Sony bought and built into Vegas Pro, and until last year I was still using one of the somewhat crippled consumer versions, so the cost of upgrading was less than if I had been starting from scratch.
For a long time I actually used Nero a lot for editing. I haven't used Nero for editing or rendering lately, so I don't know whether it has H.264 support, and if it does, just how strong that support is.
But I will say that for a long time I found Nero to be more robust and flexible than Vegas, but not nearly as adept at the (non-gimmick) creative controls that Vegas offers in abundance, and I'm not speaking of gimmicky special effects that scream "amateur" -- but the really powerful ones, like color grading and heavy duty audio editing, some of which are available in limited ways in the consumer versions, but are only fully enabled in the Pro package.
Here are some links that may get you started looking at some of the open source alternatives that have some kind of H.264 (or X.264, an open source equivalent) support:
A Listing of current Final Cut "equivalents" -- An open source fanboy introduction to and listing of all the open source NLEs that penguins love to dream about.
Blender - for the exceptionally brave It's extremely powerful, and that's the problem. But it is open source and has a dedicated user community. But the learning curve is widely recognized as very steep, in part because Blender is also a full featured CGI rendering package that, at least in theory, could be used for theatrical release production -- as long as you have a render farm handy.
I found these (and other) links by searching the terms: "open source" NLE video -- the search gave over 8,000 other hits.
I'd encourage anyone still reading this post to do as much homework as you have time for -- especially and talking to, and lurking in forums where users of the packages you're considering are most actively congregating.
The real investment here is the time you'll spend learning to edit and deal with video in all its forms -- the time (and I mean lots of it) is the real cost, compared to that, the base cost of your chosen NLE pales by comparison. In fact, I'll lay odds that within a year or two you'll have accumulated a raft of programs to assist you in production, and most can be mixed and matched, within reason. Photoshop, Painter, GIMP, and many specialized texture creating tools, for instance, may come in handy, especially if you are an admirer of Robert Rodriguez and his 5-minute Film Schools.
Likewise for audio production tools. If you're a solo artist, especially, you'll very likely wind up with more tools than have time to learn well. Which is where collaboration comes in, if you can work it out. Even with the power that computers provide in making production something one person can do alone, real talent in all areas of production is rare, and your work can be much better if you can put together a team of friends or co-workers who each have mad skills in a particular area of production work.
All programs ( of any kind, but especially NLEs) have their quirks, which you'll usually find discussed in the online forums dedicated to each package, as well as in those dedicated to to video and audio production in general.
I hope you've found this a useful starting point for investigating basic editing (and file conversion) for streaming video. Please add comments and questions, so I can do better next time... or suggest a specific area to focus on.