@aral
The fact is that it is using the very ancient VP8 codec (not VP9, not AV1, which are super CPU-intensive), because that's pretty much the only free codec you can do realtime encoding with "in software" on most computers.
Related to https://gitlab.gnome.org/GNOME/gnome-shell/-/issues/5908 there is work going on to make it use hardware-accelerated encoding when available, which I guess would open up VP9 and AV1 as possibilities, but I don't know if a codec change is in the plans.