Streaming works by cutting video into short segments, sending them over the internet a few seconds ahead of playback, and letting your player switch between quality levels as your connection changes. You start watching almost immediately instead of downloading the whole file first.
1. Encoding
The source video is compressed with a codec such as H.264 or HEVC, usually at several quality levels (for example 480p, 720p and 1080p). For live TV this happens in real time, a few seconds behind the actual broadcast.
2. Segmenting and playlists
Each quality level is split into short segments, often a few seconds long. A playlist file lists those segments. In HTTP Live Streaming (HLS), standardized in RFC 8216, these are M3U8 playlists: a master playlist points to one playlist per quality level, and each of those lists its segments. For live streams the playlist keeps updating as new segments are created.
3. Delivery
Segments are ordinary web files, so they can be delivered by content delivery networks (CDNs), meaning servers spread across many locations that keep copies close to viewers. That's how one service can stream to huge audiences.
4. Adaptive bitrate playback
Your player measures how fast segments arrive and picks the best quality it can sustain, switching up or down between segments. That's why a stream may look soft for the first few seconds, or drop in quality when your Wi-Fi gets busy, instead of stopping completely.
5. Buffering
Players keep a few segments in reserve. If the connection stalls longer than that buffer lasts, playback pauses to refill it. That's the spinning wheel. Live streams keep a smaller buffer to stay near the live moment, so they're more sensitive than on-demand video.
Live vs. on-demand
On-demand video is fully encoded before you press play; live video is encoded and segmented as it happens. Learn more in What is VOD? and What is IPTV?.
When it goes wrong: fix buffering or fix blurry, low-quality video.