Before you get too excited, you should know that on the iPhone and iPod touch, video chatting is a one-way affair. Because the iPhone's camera is located on the back of the device, fring chose to enable only incoming video for the iPhone (and the iPod touch, of course, has no camera at all). So, people can send you video, but you can't send video to them. fring's application for certain Nokia devices does have two-way video calling, but iPhone and iPod touch users will have to wait for some future (and for now purely hypothetical) device with a front-facing camera before two-way video calling will be feasible.
I tested the new video chatting feature using my home Wi-Fi (I haven't yet had the opportunity to test whether this new feature works over 3G). Video performance was fairly smooth unless I made really quick motions, and lag was minimal. Audio quality was fair, but the audio did have a tendency to drop out occasionally. Overall, video chatting seems nicely implemented, though it's nowhere near as smooth as in the simulated images in fring's promo video. Given that video chatting is a one-way street for now, I'm not certain how often people will utilize this new feature.
fring's promo video for the new video chatting feature is below. Note that the images in this video are simulated -- I couldn't find a way to make video chats fullscreen as in this video, and performance on my network was far choppier than that in the video.