A lot of work has been going on improving the Theora video encoder. Given a better encoder we end up with better quality Theora videos without the need to change the decoder in existing players. The project name for the Theora encoder improvements is 'Thusnelda'.
Periodic updates have been released by Xiph showing the progress of the new encoder. The latest update makes interesting reading and show's graphs comparing it against other Theora builds, and against x264 (an H.264 encoder).
The update show's that some great improvements have been made, and in some cases is comparible to the results from the x264 encoder. Greg Maxwell gives some more information in this reddit comment about the results.
Remember that the intent of this is not to compare Theora vs x264, or to say one is better than the other in the general case. It's to show the improvement of Theora vs older Theora versions. The fact that it compares favourably against x264 in this one case, using one particular test of quality, is a good result though.