Codec stands for COder/DECoder. It is a small piece of software that allows you to make/play movie/audio compressed in a certain format. MPEG-1, MPEG-2, MPEG-4, DivX are all codecs. AVI, ASF, WMV are not codecs, but file formats. AVI is a container format, meaning it can be made using many different codecs.

Video files in general are really big, a normal sized 1 minute movie can take up to 1 Gb of hard disk space. While this is good for the quality of the video, it is not good for anything else. Imagine waiting for 1 Gig to be downloaded before you can see a 1 minute video....even at the fastest internet speed, you'd be long gone to the bar before you would watch it.

CODECs are little plug-ins that help compress and decompress movies, thus allowing us to put them on the internet with a minimum of hard disk space and download time required. Of course we lose a bit on the quality, but that is thel price to pay.

Codecs compress movies by looking at consecutive frames and storing just the differences (temporal compression), and/or by generalizing an image and removing redundant data (spatial compression). Many codecs use both spatial and temporal compression techniques. The process of analyzing each frame and compressing a movie can take a long time, but decompression takes place in real time to allow smooth playback. Most codecs use lossy compression algorithms, which means the process of compression removes data from the original movie. You should never compress a movie multiple times, as each pass will lower the quality of the movie. Choosing a codec depends on your source material. For temporal compression, video that changes very little from frame to frame will compress better than video with lots of motion. For spatial compression, the less detail there is in an image, the better the codec is able to generalize and compress it.

DivX

The DivX codec is the greatest codec, the best compression technology for high-resolution movies. The DivX codec is becoming the standard for high quality video over IP networks because it hits the sweet spot between superior visual quality and small file size. With a broadband connection, you can download a full-length feature film in the time it takes to have a pizza delivered!
DivX was based on Microsoft MPEG-4 technology. MPEG-4 is a future standard for the delivery of interactive multimedia across networks. As such, it is more than a single codec, and includes specifications for audio, video, and interactivity.

XviD

XviD is an ISO MPEG-4 compliant video codec. MPEG-4 is very effective in compression, because it reuses data from one image to generate the next one (still images of a video are only 1/25 of a second or even less apart from each other, in almost all cases they look very similar). XviD has a lot of useful features for compression and video processing. The codec was developed by the group of enthusiasts. XviD isn't compatible with DivX.

DV Codec

The Digital Video Codec is different from most of the codecs. It is used in two primary ways:
For storing original footage, and transferring it to the computer;
For storing final edited footage, for playback to a television.
DV (Digital Video) cameras provide two major advantages over conventional analog cameras, as shown below.
Image quality: by storing the video in a digital format instead of analog, it is possible to attain excellent image quality on moderately priced gear.
Video capture: The video is digitized as it's being filmed, and is stored as files on a tape in the camera.

MJPEG

MJPEG stands for Motion JPEG, and is identical to Photo-JPEG except that the MJPEG codecs have translators built-in to support the different capture cards.
MJPEG is not the same as MPEG, although the names are confusingly similar. The primary difference is that MPEG provides temporal compression, while MJPEG only provides spatial compression.
MJPEG codecs are often used as storage formats for large files that need to be archived with good quality. It is a lossy codec, but at 100% quality, the image degradation is minimal. All the JPEG codecs require significant amounts of CPU power.
Avoid saving the same file multiple times with any JPEG codec, as the JPEG artifacts may build up and become objectionable.

Indeo

Indeo was developed by Intel in the 1980's, and was originally knows as "RealTime Video 2.1" (RT21). Indeo is very similar to the Cinepak codec. It is is well-suited to CD-ROM, has fairly high compression times, and plays back on a wide variety of machines.
Takes about a third less time to compress video than Cinepak. Has color artifacting that some producers find objectionable. The recommended key frame interval for Indeo is 4, regardless of the frame rate.

Cinepak

Cinepak was originally developed to play small movies on '386 and '030 systems, from a single- speed CD-ROM drive. Its greatest strength is its extremely low CPU requirements. Cinepak's quality/datarate was amazing when it was first released, but does not compare well with newer codecs available today. There are higher-quality (and lower-datarate) solutions for almost any application. However, if you need your movies to play back on the widest range of machines, you may not be able to use many of the newer codecs, and Cinepak is still a solid choice. Video quality is lower than many other codecs at the same datarates.


Lossless video/audio codecs

All usual codecs have lack of quality preservation. DivX/XviD video contain a lot of small defects, but they are hardly appreciable by human eye. This quality loss can be even unseen if the video codec is used on video materials only once. But if you want to recompress the video several times for various purposes (for example, applying visual enhancement or effects, merging video fragments) then you need video codec which always saves 100% of quality. This is lossless video codec.

HuffYUV

Huffyuv is a lossless video codec that is highly recommended to use in tasks that are done prior encoding to a lossy formats, like DivX or MJPEG. The output from the decompressor is bit-for-bit identical with the original input to the compressor. Huffyuv is a freeware codec that offers excellent performance, but requires a lot of free HDD space.

AlparySoft Lossless Codec

This codec is created for lossless video compression. The techniques, used by this filter, allow to compress videos 1.2 - 1.5 times better than HuffYUV. The source and destination video compressed with ASLC are absolutely identical after encoding/decoding process, the compression ratio is twice - 5 times.

MSU Lossless Video Codec

This codec is intended for lossless video compression (used for saving master copies or intermediate rendering results). "Low compression" - absolutely lossless mode: the data in RGB format after decompression is bitwise equal to the source data. This mode has the smallest compression ratio.

AVIzlib

Lossless video codec based on zlib library. The codec has the same compression algorithm as ZIP packer. AVIzlib is intended for video streams inside AVI container.

True Audio Codec (TTA)

True Audio Codec is a Lossless Audio compression codec. In contrast to MPEG Layer-3, it reduces the size of audio streams without affecting the quality, as the uncompressed signal is exactly identical to the original. This codec can be successfully used for AVI files (True Audio DirectShow Codecs Suite).