Yes, video is streamed directly from its home server. There is a an option to mirror videos, so that your server will work as a seed, helping with bandwidth.
Images on Lemmy is also loaded from its home server, but there is a cache.
Remember, federation is copying, not creating some kind of remote view. If you're federating videos, you're letting other websites consume terabytes of your storage space amd bandwidth.
Why is “drama” on Lemmy always highly exaggerated by people?
“Endless wars of who federates with who”. What is that person even talking about and who the fuck would even care as a normal user?