OS: Ubuntu 13.10
Linux kernel: 3.11.0-15-generic
VGA compatible controller: Intel Corporation 4th Gen Core Processor Integrated Graphics Controller (rev 06)
3D controller: NVIDIA Corporation GK107M [GeForce GT 750M] (rev a1)
Broken: 2.69 7c69215
Short description of error
Choosing the Lossless Output option and a low bitrate gives a video with lossy compression.
Exact steps for others to reproduce the error
(1) Open new Blender file
(2) Under Render tab, under Output header, select H.264 for the File Format.
(3) Under Render tab, under Encoding header, select H.264 for format, enable "Lossless Output" and set (Video) Bitrate to 100.
(4) (Optional) set End frame to 50
(5) Press Animation
(6) Open the final video file in any video player and notice the lossy compression (I tested in VLC, Totem and Blender's VSE)
In addition to this bug, I also believe that once "Lossless Output" is selected, the options below should be greyed out to indicate they have no effect.
Step 1-4 have been completed already in this .blend file:
Here is a screenshot of the (paused) output video: