DivX is basically a video codec, along the lines of MPEG or Quicktime, as a video format its been kicking around for a while, and in its most recent guise it supposedly offers near DVD quality footage at 8-10 times the compression ratio.
Its around about this point that people start making references to "small disks" and "poor FMV quality" in relation to "PS2 and Xbox" but i can safely confirm that that is bullshit. just look at Smash Bros or Resi for example.
Mind you, i feel FMV is an outdated method these days, all cutscenes should be in-engine IMO.