Xvid is not a video format like MP4 but rather is a video codec library following the MPEG-4 Part 2 Advanced Simple Profile (ASP) coding standard. Xvid is a competitor of the proprietary DivX codec developed by DivX Inc. In contrast to DivX, Xvid is a free software distributed under the GNU General Public License. Because of this, Xvid is used on all platforms for which the source code can be compiled.
The Xvid software is used to compress and decompress video data to MPEG-4 ASP. Due to the compression supported in Xvid, a DVD movie can be sufficiently compressed to fit onto a CD while still retaining the DVD quality. The compressed video is stored with the .xvid extension. Xvid can be considered as ZIP for video files. Xvid compresses video at a 200:1 or more ratio. This allows for more efficient disk storage and faster transmission over networks.
DivXNetworks founded the OpenDivX in January 2001 as a part of Project Mayo. It was intended to be the home for open source multimedia projects. However, the source code was soon placed under a restrictive license and DivX 4 codec emerged as a closed-source commercial product. After this, the OpenDivX was forked and all the code of OpenDivx was replaced and Xvid was published under GNU General Public License.