As far as I know, and have tested, only Apple Apps are able to do video with Airplay. eg. YouTube app(apparantly not the mobile you tube site) Itunes Videos. I think they might also work in safari but probably only from apples sites right now, my geuss is its some kind of format that is basically h.264 but I'm sure people smarter than myself will soon be able to transcode to this format to enable AirPlay for other apps like VLC or things of this nature.
However most 4.2 updated Audio Apps work very well with AirPlay directly to a AirPort express which is a great way to add At set of speakers in your room or kitchen.