WP uses filters and you can read about it here:
http://codex.wordpress.org/Filters
To embed videos you need to make this change:
add_filter('content_save_pre', 'wp_filter_post_kses');
to
remove_filter('content_save_pre', 'wp_filter_post_kses');
You do this in kses.php
BUT there is a security risk in doing this. Read more at the URL above...