Video compression ratios and transcoding

Hi Brendan, this is the most detailed information I have seen on this topic, though it's not that recent I doubt much has changed since:

Under the hood: What happens to your videos after upload

On choosing the number of renditions or qualities that a video is encoded into:

"For example, if the input video is at full 1080p HD resolution (1920x1080 pixels), then we would decide to use 6 steps, starting from 1920x1080, down to 320x180. If instead the input video is of standard definition resolution (eg. 640x480 pixels), then we would pick just 3 steps, from 640x480 down to 240x180. Naturally, we would never exceed the resolution of the input video."

On selecting a bitrate and what goes into determining this:

"the next stage is to determine the bitrate for each rendition. Naturally, higher the quality of the rendition, the more bits it requires - but not all videos are created equal. Different types of videos require different bitrates to achieve 'high quality' - so we needed to be smart about choosing the bitrate. Here too, our experience with Office365 Video came in handy. We've observed, for example, that marketing videos are delivered at high bitrates, since they were most often produced by professional agencies. We also receive a ton of PowerPoint presentations which are captured at full 1080p HD resolution, but at very low bitrates - the screen has mostly static text content."

This goes on to say:

"We used all this information to come up with a simple yet elegant function that measures the characteristics of the input video, and comes up with a recommended bitrate for that rendition. In our tests, this function is holding up well - the marketing videos end up getting encoded at close to 6 Mbps at 1080p, whereas a PowerPoint presentation would use just around 500 kbps."

This page has more general details on what happens - Upload process overview.