I was browsing through my Steam settings recently when I found the following checkbox:
What is hardware video decoding, and should I enable it? Would it increase or decrease my performance? What graphics card do I need to use it? (I assume it means my graphics card when it says 'hardware video')
Best Answer
This option will allow your GPU (graphics processing unit) to process certain video data, instead of your CPU doing it.
This is a good thing if your GPU will do a better job than your CPU - it will take load off the CPU and hopefully make the application run smoother.
However if your GPU is old and/or not very good, it may not be wise to enable this option because your CPU could in fact process the data quicker. I'd try it and see if there is a performance difference to decide if you want it enabled or not.
From henryg on the Steam forums:
(Also, this in general is what "hardware decoding" in terms of graphics will refer to, so you can watch out for it elsewhere.)