From Microsoft Corp.

AVI has been around since the early 90's.

The Microsoft Audio/Video Interleaved (AVI) file format is a RIFF file specification used with applications that capture, edit, and playback audio/video sequences.  In general, AVI files contain multiple streams of different types of data.  Most AVI sequences will use both audio and video streams.

The audio and video chunks in an AVI file do not contain time stamps or frame counts. The data is ordered in time sequentially as it appears in the AVI file.  A player application should display the video frames at the frame rate indicated in the headers.  The application should play the audio at the audio sample rate indicated in the headers.  Usually, the streams are all assumed to start at time zero since there are no explicit time stamps in the AVI file.  The lack of time stamps is a weakness of the original AVI file format.

The video data in an AVI file can be formatted and compressed in a variety of ways.  There are, and have been several compressors:

Note: you can also save without compression (full-frame mode).

MPEG (Moving Pictures Experts Group) is a group of people that meet under ISO (the International Standards Organization) to generate standards for digital video (sequences of images in time) and audio compression.

following is from http://bmrc.berkeley.edu/frame/research/mpeg/mpeg2faq.html 

MPEG is a generic means of compactly representing digital video and audio signals for consumer distribution.  The basic idea is to transform a stream of discrete samples into a bitstream of tokens which takes less space, but is just as filling to the eye (…or ear). This "transformation," or better representing, exploits perceptual and even some actual statistical redundancies. The orthogonal dimensions of Video and Audio streams can be further linked with the Systems layer---MPEG's own means of keeping the data types synchronized and multiplexed in a common serial bitstream.

The essence of MPEG is its syntax: the little tokens that make up the bitstream.  MPEG's semantics then tell the decoder how to inverse represent the compact tokens back into something resembling the original stream of samples.  These semantics are merely a collection of rules (which people like to called algorithms, but that would imply there is a mathematical coherency to a scheme cooked up by trial and error….).  These rules are highly reactive to combinations of bitstream elements set in headers and so forth.

MPEG video is often quoted as achieving compression ratios over 100:1, when in reality the ratios are between 8:1 and 30:1.

There has been an evolution of standards for MPEG for example, MPEG-1 was optimized for CD-ROM or applications at about 1.5 Mbit/sec. Video was strictly non-interlaced (i.e. progressive).

The White Book specifies the file structure and indexing of multiplexed MPEG video and audio streams.  The specific MPEG parameter definitions of White Book are:

MPEG I and II standards use discrete cosine transform transforms for compression.

QuickTime is a cross platform system-level software package for Macintosh, Windows and Java which adds the capability to play movies, synthesize music, display animations, view virtual reality worlds and add multimedia capability to the computer desktop.

QuickTime is implemented as a set of extensions on the Macintosh platform and a dynamic-link library (DLL) on Windows. It can process video data, still images, animated images (also known as sprites), vector graphics, multiple sound channels, MIDI music, 3D objects, virtual reality objects, panoramas and text. Currently, more than 70 different formats can be imported or exported and as formats are added, applications created today will work with them automatically.  QuickTime is a generalized way to define time lines and organize information along these time lines.