(http://i.imgur.com/92O67.jpg)
One of the tradeoffs that was made by Google and Asus to keep the price of the Nexus 7 down was to not include a rear-facing camera. Now this omission seemed reasonable to most since the N7 does provide a front facing camera for video chatting in apps and services like Skype and Google Video Mail. Out of the box surprisingly Google didn't include a camera launcher....but this was quickly rectified by the developer community as it gained a dedicated camera app (http://nexus7forum.com/index.php?topic=96.msg311#msg311) soon after release.
Now the front facing camera is admittedly of middling quality and all of 1.2 megapixels. It also only allows up to 480p video recording...until now. It seems XDA-Developers member 'hillbeast' has figured out that it's a relatively easy procedure to enable 720p recording on the front facing camera. It seems the limitation to 480p was never a hardware issue, it was just that Google did not provide the appropriate 720p media profile out of the box. Here's two 'test' videos that will let you see the difference between standard 480p and the now upgraded 720p video on the Nexus 7 after you add the media profile.
https://www.youtube.com/watch?v=1hELsUBVR5I (https://www.youtube.com/watch?v=1hELsUBVR5I)
Nexus 7 480p test video
https://www.youtube.com/watch?v=ZAq47ogkWKc (https://www.youtube.com/watch?v=ZAq47ogkWKc)
Nexus 7 720p test video
Now to see the difference in the videos above make sure you check the appropriate video quality of 480p or 720p in the youtube settings on each video. Now to be sure the video quality still isn't going to win any awards but it's nice to know the ability is there if you want it. You can get all the step-by-step details to enable the 720p recording on your Nexus 7 at the link below. Let us know if you do in the comments.
XDA-Developers 720p video recording MOD for Nexus 7 (http://forum.xda-developers.com/showthread.php?t=1868962)