This style only affects the "large player"/"theater mode", which is the button right next to the "full screen" button.

Updated to work with the new http://googlesystem.blogspot.com.br/2015/04/youtube-tests-new-video-player-for.html (https://www.youtube.com/testtube).

Known issues:

• Video annotations and the progress bar do NOT line up. Impossible to write a CSS-only solution. Seems fixed as of 2016-06-03.
• The video does not take the entire window height, there is the YouTube bar at the top. It is done on purpose, just to make the style work out-of-the-box when you want to watch a video; and also to keep the YouTube UI functional.
• The video does not take the entire window height, there is a small space at the bottom. It is done on purpose, because of the horizontal scrollbar that may show up if the window is resized.
• 3D videos (such as https://www.youtube.com/watch?v=XoBfYhAfw7c) are not resized. That's because I don't think it is posssible to resize a <canvas> element using only CSS while preserving the aspect ratio.

This style is constantly updated. I update it whenever it gets broken because YouTube changed their code. If you find something wrong/broken, feel free to contact me.