While those with HTC devices enjoy the benefit of HTC's own YouTube client which streams in HD, the rest need to use the "official" method, which is...err..lacking.
SuperTube actually outdoes the HTC app by going one-step further and allowing you download the video to your phone (in regular or HD format, to boot). The app fetches for $1.29 and there is a free trial, with ads. Our thoughts? It's slick, fast and it works, so it's a winner. Grab it here in the Marketplace