DIVX got its name from a product relaeased by circuit city which allowed people to buy DVD movies at a cheaper price and view them for a certain period of time. After the expiration, the disc would no longer play. Microsoft originally developed the codec with an AVI lock. This was supposed to block people from ripping movies to AVI for web distribution.
DIVX is based on the MPEG 4. The DIVX codec uses lossy MPEG-4 Part 2 compression in which quality is balanced against file size for utility. It is one of several codecs commonly associated with “ripping.” Therefore, audio and video multimedia are transferred to a hard disk and transcoded. By combining MPEG 4 and MP3 sound, these video formats contain digital quality.
The greatest advantage of DIVX codec is the compression ration of 10:1 it offers. This means that if you have a 10 MB video file, DIVX will change the file size to 1 MB.