In another coup for VUDU, the startup Wal-Mart (WMT) acquired back in February for over $100 million, Boxee announced today that the high-quality video-on-demand service will appear on Boxee Box, a dedicated $199 set-top box launching next month, as well as the Boxee app.

“It rounds out our movie offering,” says Andrew Kippen, Vice President of Marketing for Boxee. “We have a Netflix application, indie movies online, and others, but one of the things missing was new blockbusters. As soon as titles like Prince of Persia or Splice come around on DVD, they’re also available same-day on VUDU.”

The partnership should benefits both parties, which are vying for a piece of an increasingly competitive market — online video streaming — occupied by competitors like Apple TV, Google TV, and Roku. For VUDU, it means visibility to Boxee’s 1.4 million users, while VUDU’s 15,000-plus collection of movies will help expand Boxee’s own library, which to date, did not offer HD video-on-demand content. That puts it ahead of a service like Hulu which, despite being a leader in video streaming, doesn’t offer HD content.

However, VUDU content for the standard Boxee software app on PC, Mac and Linux will be standard-definition. It’s only the Boxee Box, manufactured by D-Link for Boxee, that will have access to an additional 3,000 HD titles viewable at up to 1080p with 5.1 Dolby Digital Surround. Kippen says the company’s reasoning being the split is that Boxee Box content will be less easily-pirated than content coming through via a computer. That means studios will be less wary about licensing HD movie content for online viewing.

Until earlier this year, VUDU was one of those also-ran startups that flew under the radar, despite its team consisting of vets from TiVo, WebTV and Danger Inc. Originally a dedicated set-top box launched in late 2007 that operated on a pay-per-view model for instant streaming of TV and video content. The company dropped its set-top box ambitions but kept the pay-per-view scheme when Wal-Mart announced it would buy the startup — the big box chain was reportedly sold on the quality of its streaming, which was visibly better than Netflix, or even Apple TV downloads, at the time.

With Wal-Mart putting Vudu on an affordable Internet TV device, and presumably selling that device in its own stores, Vudu certainly has a better chance of keeping up with its competition than it did yesterday. The Boxee Box will also fill a niche for Wal-Mart and other customers who are interested in Internet enabled TV but aren’t ready to fork over several hundred dollars more to replace their recently purchased, non-Internet flat-screens with a widget-enabled TV. Boxee users meanwhile, will benefit from new HD streaming content before even Netflix users can get their hands on it — something only the big cable companies and DirecTV have previously been able to tout to consumers.