Why can't my computer play some .avi (or .mpg, .mov, or .qt, etc.) files? I get asked this question frequently by engineers and "normal" people at the grocery store. The answer is that digital movies have 1) a wrapper and 2) a CoDec. Your computer must understand both. Two common wrappers are (Video for Windows) AVI and (Quicktime) MOV - these determine all the controls you can manipulate as the "consumer" of the video. CoDec stands for Compressor/Decompressor, and the named codec algorithm (like mpeg 1, cinepak, DivX, etc.) defines how the images were stored internally: they are compressed to take less disk space, but often at the price of reduced quality.

So you downloaded an .avi file because you have Windows Media Player - will it play? The player can open the wrapper, yes, but you will only see the images if your computer also has the appropriate codec installed - some are so common that they were part of your system by default. Cinepak, for example, is fairly common, and Cinepak-compressed video can be wrapped inside a .avi OR a .mov; Two versions of the same movie can have almost identical sizes, since the only difference is a few bits in the file header. But Sorenson is a flavor of codec that only fits with Quicktime wrapping.

The above is true, but simplifies and does not address many other digital video practices. For example, one might think that the file "movie.mpg" would require a distinct player that understands the MPG wrapper, but MPEG 1 is actually a codec, with an intentionally agnostic wrapper, so many players can unwrap the data.

In my opinion: MPEG 1 is currently the "safe" way to distribute movies since almost every computer platform has a player that decodes .mpg's by default, but DivX can often pack more detail/quality into a smaller file size.