By Michal Lev-Ram

After over a year of development, testing and refining, online video service Hulu launches Wednesday and viewers will get to chance to see if it lives up to all the hullabaloo.

A joint venture between News Corp.’s Fox (NWS) and NBC Universal , Los Angeles-based Hulu says it aims to bring together the widest selection of free, “premium” videos on the Web. But unlike Google’s YouTube (GOOG), where unauthorized clips often end up, Hulu’s content is the result of pre-established partnerships with entertainment companies like Lionsgate (LGF) and Sony Pictures Television.

When plans for the then-unnamed site were announced last year, many ridiculed the idea, saying “old media” doesn’t get the Internet. But when Hulu gave select viewers a look at the site, some critics changed their tune. The company received rave reviews for its site’s ease-of-use and simplicity.

The site features more than 250 television shows and 100 full-length feature films from Fox and NBC as well as content from companies like Warner Bros. Television Group (owned by Time Warner , the parent company of Fortune and CNNMoney). Clips of other shows — including Saturday Night Live — will also be available on the site.

So far Hulu has failed to sign on two other big television networks: ABC and CBS .

Still, industry insiders say the marketing potential of Fox and NBC — makers of hit shows like “Deal or No Deal” and “24” — is huge.

“The networks have the power to do big things with online video,” says Morgan Guenther, CEO of interactive media startup AirPlay and the former president of TiVo. “If they do it right this thing will definitely have legs.”

Unlike YouTube, Hulu has an ad network already up and and working at launch time, though its lineup of advertisers is still limited. Hulu is experimenting with letting viewers choose which commercials they watch, and doesn’t let them fast forward through ads.

But like its rival YouTube, Hulu is also encouraging viral distribution. People can edit shows down to a few seconds and then e-mail those clips to friends. They can also embed videos on blogs and their MySpace or Facebook pages.