SUMMIT CINEMA
This page gives a basic overview as to what the codec fix is, and why it is necessary to watch videos on Cinema servers like Summit Cinema.
The Garry's Mod developer API provides developers with a way of using web browsing in-game. On the main branch of the game, it uses a web engine known as Awesomium.
Since Garry's Mod is an old game, the Awesomium engine used has not been updated in a long time--it's like trying to use Netscape or Firefox 11 in the modern day.
Awesomium is missing a lot of features, many of which are required for Cinema to function properly, such as modern video codecs, which are required for videos with those codecs to be played.
The x86-64 beta branch of the game uses Chromium, which is also what many modern web browsers use internally, such as Brave & Google Chrome.
Awesomium is effectively replaced with Chromium on this beta branch. For programmers and developers looking to use Chromium inside their applications, they use something known as the Chromium Embedded Framework (CEF).
Garry's Mod on the x86-64 branch uses the Chromium Embedded Framework to embed Chromium inside the game.
The problem is that the version of CEF that Garry's Mod uses is a few years out of date and does not have proprietary video/audio codecs enabled, such as H.264, which many modern video formats use.
This is where the codec fix comes in--it patches the game to use a modern, stable version of the CEF, while also enabling propietary codecs for use.
With these changes, it finally allows proper video playback for various Cinema services.
This is something that it seems only Facepunch really knows about. It may be possible that Facepunch is simply being cautious--as the differences between Awesomium and Chromium are so major, patching potential security exploits and accounting for all edge-cases could take a long time.
It's a large undertaking, and Garry's Mod does not have a large development team, so such a big change would take a lot of time and effort from the Garry's Mod development team.
There is a GitHub pull request that would basically integrate the codec fix into the game, but it has yet to be accepted at the time of writing this.