For most of us VLC is a first choice when it comes to Media player and I personally recommend it being opensource and offering support for universal Media formats. It is not completely new feature but now VLC media player supports playing Youtube video just by hitting URL as we do in web browser.
Here is a step by step procedure , that users who are not yet too familiar withVideoLAN can follow to obtain the desired result :
Go menu Media > Open network stream;
Paste the URL YouTube videos ( eg http://www.youtube.com/watch?v=grTCDFbhKMU ) in Enter a URL network and click Play.
It also allows you to save streams from Youtube although there are many ways todownload Youtube videos So, download VLC Media player 1.1 or if you already have one installed, check for updates.