I suspect what they are referring to there is the process of remuxing the file and removing extra audio streams, ie. a BD50 BluRay of "They Shall Not Grow Old" comes in at 20GB with two audio streams, DTS-HD and Dolby Digital. The remux of that BluRay comes in at 16GB and has an identical bit-rate on the video stream, but the Dolby Digital audio stream has been removed, as well as the menu graphics (though this would not apply to a WEB stream).
Everything else probably 95% you see in the wild are transcoded to lower bitrate and stripped out of all the extra files in the container (sub/multiple audio stream/highbitrate audio) to smalled files - because thats what most people want:
Small Video easily playable on a regular screen.
Creates an obvious problem though.
Aside from the quality loss due to re-encoding - which should be identical to the loss encountered when capturing digital video and audio output, assuming the capture is done correctly - I fail to see anything "obvious".
Edit: I just saw parents reply. It took a while to type this out on my phone :/