XviD is an Open-source compression codec based on MPEG-4 ISO format. It uses ASP features such as b-frames, global and quarter pixel motion compensation, Lummi masking, trellis quantization, and H.263, MPEG and custom quantization matrices. XviD, like many other MPEG-4 formats, can be played with certain MPEG-4 compatible, stand-alone DVD/DivX/XviD players.
Original DivX codec was not developed from the scratch, but was just a hacked version of Microsoft's WMV video codec. This version, best known as DivX v3.11 alpha (which was the last official version of the hacked codec), quickly became ridiculously popular among video freaks all over the world.
After its success, group of people, most notably the hacker behind the DivX codec, started developing a legal version of the codec which would be a real codec instead of basic hack of existing Microsoft codec.
They launched an open source project, dubbed as Project Mayo (also known as Open-DivX) to develop this codec. After a while the codec matured, but the original developers wanted to push it further and started a company called DivX-Networks which started developing its own closed source version, based on the work of the Project Mayo. Eventually this closed source code was released as DivX 4 (since then, we've seen this closed source version to develop further and currently, the latest version of the codec is called DivX 6.0). Now, open source guys didn't want to abandon the work of the Project Mayo and they continued to develop the codec further and the XviD was born.
XviD is not a video format. Since XviD uses MPEG-4 Advanced Simple Profile (ASP) compression, any video that is encoded with it is termed "MPEG-4 ASP video" - not "XviD video" - and can therefore be decoded with all MPEG-4 ASP compliant decoders. This includes a large number of media players and decoders, in particular all the ones based on the free/open source libavcodec library from FFmpeg.
XviD encoded files can be written to a CD or DVD and played in a DivX compatible DVD player. However, XviD can optionally encode video with advanced features that most DivX Certified set-top players do not support. Files encoded with global motion compensation, Qpel, MPEG quantization, multiple B-frames or files that exceed the VBV limitations may not play back properly on DivX Certified hardware devices.
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Related External Source
: Xvid Knowledge from Xvid Org
:FFMPEG Knowledge from FFMPEG Org