The "Insert Image" button has been relabeled "Insert Image or Video" and now supports videos in MP4, WMV, and OGG format.
When you browse to the image you want to upload from your computer, and double-click it (or otherwise begin the upload process), the BROWSE button will disappear. Then, after the upload is complete, the button will reappear, and the tag for the video will be added to your post, wherever your cursor was located when you pressed BROWSE.
I am going to add a progress bar or spinner or something during the upload, since videos can get pretty big (and slow to upload), but I wanted to go ahead and tell everyone about the new feature.