From version 1.8 onwards you can set the aspect ratio of a Youtube video via the ratio parameter.

Possible values are: 16:9 for widescreen and 4:3

Here you are some examples:

16:9 aspect ratio

Shortocode parameters used:

v=CIcIyVQ3E_E ratio=16:9

4:3 aspect ratio

Shortocode parameters used:

v=CIcIyVQ3E_E ratio=4:3