Yesterday, Microsoft released a new version of the YouTube app for Windows Phone 8, and the initial reaction has been pretty positive. The app is a huge upgrade, which wasn't that difficult since the stock YouTube app was just a link to the YouTube mobile site before, but the app is also breaking a couple key terms of service. So, don't be surprised if the app gets blocked soon.
Microsoft has admitted that it had to "re-architect" the YouTube API in order to make the app work. Google has yet to comment on the situation, but it seems that the two companies may not be as good as we first thought when we saw the app update released. Google usually doesn't take too well to apps messing with ads, not only for its own revenue, but because YouTube content creators often rely on that ad revenue.