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In Laymens terms, a Mpeg-4 Codec means Windows will be able to decode Mpep-4 Videos with just about any program. DivX is an Mpeg-4 based codec similar to XviD.
A DVD for instance encodes video in Mpeg-2 and I am not sure how the audio is encoded, but you get the idea.
Mpeg-4 is a very high-quality for small filesize codec with different optimizations for different codecs. Typically, a movie or video is encoded into DivX or XviD (Free Open-Source) and the Audio is created as Mp3 or AC3 (A Dolby Digital Surround Sound capable audio Codec) and then the video and audio streams are put together into one .avi file.
Double clicking the file will load something like Media player which will detect there are two streams one audio and video. It will then load the two codecs and play the video.
Let's say you want a DivX movie of anything. You can get a Bit-Torrent Client (legal) and then go to a website like http://isohunt.com and join a peers-to-peers network (not Peer-To-Peer) and download just about anything. This is very likely not legal, but you get the idea.
You can also download your favorite TV Show or Shows especially if you miss them. For instance, a 1 hour TV show is typically about 45 minutes without ads and you can find a file from 150 mb to 350 mb. The 350 mb AVI will be just about DVD Quality, yet take only 20 minutes to a few hours to download.
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