Taken from DivX Digest.com
Apart from being a trademark of Project Mayo, DivX is the name given to a video codec (a piece of software encoding and decoding video) and is based on the MPEG-4 compression format. MPEG-4 is a new standard of video compression that is both high quality and low bitrate. They are usually only a fraction (around 15%) of the size of a standard DVD, even at 640x480 resolutions, making them the best home video format thus far. They only take half the time to encode, and yet at the same time is smaller in size than MPEG-1 - due to their incredible compression technology - some have even called MPEG-4 the "MP3 of the video world". Quality ranges from net-streaming quality to DVD and better !!

Here is also a list of FAQ\'s that should answer any other question anyone else has. This site has it all, how to make and play DivX movies and all the software you need to do it.