Unless you have a good processor (desktop/laptop class), there is no way you can decode 720p smoothly.
So 720p and 1080p video decoding on ANY mobile, tablet and netbook has to be made by a specific hardware chip. Usually, this chip is part of the GPU, but having decoding for codec X with setting Y is hardware support, and has little to do with power.
It has to do with:
- hardware supporting it
- driver supporting it

N9 currently supports H.264 Baseline profile. It doesn't support Main and High profile yet (and maybe never). I don't know if it supports other codecs (or will).