Youtube says this was done for select Youtube Shorts as a denoising process. However most popular channels on Youtube, which seem to be the pool selected for this experiment, typically already have well lit and graded videos shouldn't benefit much from extra denoising from a visual point of view.
It's true though that aggressive denoising gives things an artificially generated look since both processes use denoising heavily.
Perhaps this was done to optimize video encoding, since the less noise/surface detail there is the easier it is to compress.
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