Every new software patch always comes with a certain risk of causing instability or even incompatibility issues with the software or hardware you have. This is what Microsoft’s Windows 10 Anniversary Update has done to millions of people – the new software patch has simply disabled their web cameras.
The reason for this is somewhat simple – Windows 10 Anniversary Update removes support for H.264 and MJPEG – two popular video compression formats. However, it turns out that software, which relies on H.264 and MJPEG to work properly, simply stops functioning when it finds out there’s no software support for these two formats. Thus if you have installed Windows 10 Anniversary Update and your web camera does not work anymore, do not be surprised.
Microsoft has acknowledged the issue saying that a fix is due in September but it will only solve the issues with the MJPEG format. A fix for H.264 is also due but it will come later.
Source: Nextpowerup.com