As was already mentioned, MKV is just a container format, not a video codec. MKV can contain videos encoded in MPEG 2, MPEG 4 ASP (which is used by Xvid), MPEG 4 AVC (which is used in native Apple MP4 files) and various other formats. The performance you will see depends entirely on the encoding of the video. Not being able to play one particular MKV file does not mean you can't play any.
That said, the MKV container format can at this time only be read by 3rd party players. And to my knowledge these players can not use hardware-accelerated video decoding on the iPad (since Apple does not expose public APIs for this), so they have to do the decoding in software.