The XviD codec makes it possible to compress a full-length DVD-quality movie enough to fit on a single CD (might require 2 CDs depending on the length of the movie), while still maintaining the original image quality. Despite the fact that XviD movies offer higher quality video at smaller file sizes they take less time to encode than MPEG-2 due to the incredible compression technology. The video is usually combined with MP3 or AC3 audio to enable both high quality video and audio. These factors and the fact that the codec is distributed for free has contributed to the success of the format.
When you install the XviD codec it basically provides your system with specific instructions how to compress and decompress video in the XviD format. Once you've installed the XviD codec on your system you will be able to play XviD videos using Windows Media Player or any other XviD-enabled player.