Vlc has no access to this video decoding hardware if it's locked, so must use the CPU. However, as rcxdude mentioned, those decoding algorithms are not free, and is controlled with a license key. Luckily, because its chip is intended for video oriented set top boxes, it contains a decent GPU that is capable of decoding HD video in the three main video formats used today. The RPI has a really slow processor, so is even less capable of decoding video itself, known as 'software rendering'. This means they're better suited to drawing video or 3d scenes, where it's usually possible to divide the picture up into pieces that can be processed in parallel. Graphics processors, or GPUs, have many times more cores than CPUs, but they're a lot simpler. Even modern fast CPUs struggle to decode HD video in real time, so modern graphics cards have the ability to do it instead.
