I've seen a few topics in our feedback forum asking how media uploads are handled in IP.Gallery 4.
The current version allows you to upload certain video files via a separate upload interface and displays them using basic embed tags which may ask the viewing user to download special plug-ins such as Quicktime to view them.
Video encoding is beyond the scope of IP.Gallery 4.0 as such functionality would need server level software to be installed. Similarly, to fetch a keyframe or thumbnail from a video file needs the same server level functionality.
However, media uploading and viewing has been much improved in Gallery 4.0. You can upload videos alongside normal photos and quickly add a thumbnail to the video. If you upload a m4v, certain mov files and flv files, these are played in a Flash video player much like YouTube.
I've recorded a quick screencast of the process used to upload a video taken from my iPhone to IP.Gallery 4.0.
As always, full screen HD is recommended.