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For a sandbox game this is very useful, where you can spawn video players in-game. For social games (like VRChat) this is also great since synced video playback is a very popular feature for people to watch content together in VR.
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Unity includes its own video player implementation ( https://docs.unity3d.com/Manual/Video.html ), so presumably you'd mainly want to use VLC for wider range of supported codecs?
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Basically. Unity video player is fine if you control the content. The other very reasonable option is to funnel shared content through a synced web browser interface. I've developed a few collaborative XR applications, and have used a blend of things to support sharing.
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It’s not hard to use libavcodec to transcode, though.
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RTSP support, twitch-style in-game visio, any kind of non-game Unity apps (there are many), 360 video playback, mediaplayer in VR headset, simulators of all kinds, etc..
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