Why does Ubuntu come with Totem set as default? Is there a reason or am I just wrongly assuming everybody thinks Totem is actually inferior to VLC?
Not to mention VLC is vastly known as perhaps the best video player for Windows, which would help with a smoother transition to Windows users making the switch.
Because it's not just the playback capabilities that matter. You have to take the user interface and system integration into account as well.
Totem is built around gstreamer codec adapters. This makes it a better candidate for gnome-ish-default.
VLC is built around direct interface with ffmpeg libraries (if you build mplayer from source it includes ffmpeg inside the svn checkout).
These make both of those options less probable for defaults.
I find VLC to be a superior player, but the direct reliance on ffmpeg as opposed to gstreamer is a large barrier to making it a default.
Maybe to you Totem is inferior, maybe for other it isn't.
There's has to be some sort of choices in the applications that come by default on Ubuntu, and it's impossible to please everyone.
The good thing is, that you can make whatever video player you want to be the default on your Ubuntu.
Just go to System Settings - Details - Default Applications and choose the one you want for Video
Ubuntu standard edition is gnome based and they choose the best application for the look/feel, integration with the rest of the distribution, the applications developers commitment to the open source community. Gstreamer powers totem and it's the bedrock of codec support in Ubuntu/Gnome and is pretty much bad ass. Plus, VLC sorta sucks for the interface. It's much more a stand alone application, a drop in replacement for other media players, personal choice, for that it's excellent. It's very much a power user media player and as such goes over the heads of some people. The whole point of making a distribution such as Ubuntu is that all the chosen apps are easily usable by everyone. It's really extraordinarily simple, the decision to do so I mean, not totem, actually I mean totem too! ha