CCCP! Although I still need to install real alternative to play rm files. But CCCP has most of the codecs.

Try these settings
video: two-pass, h264 or Xvid codec, quant 3/4
audio: 64/128kbps ABR, 44/48khz stereo AAC (low complexity)
container: MP4, main profile, level 3.1

The video 'quant #' determines video quality, lower = better quality and bigger file sizes. As for video codec quality vs encoding speed trade offs it's: h264 (best/slowest) > Xvid > Divx (worst/fastest). I transcode alot of movies for ipod/psp. I usually use 1-pass Divx just because it can transcode up to 50fps on my crummy PC (ie: a 2 hour movie takes 1 hour to encode). But if your going for archival quality or have a phat rig, stick with h264 (aka Mpeg-4 AVC) and if time is not a problem, go for 2-pass encoding. For video resolution, DVD is 720x480. So try to stick below that while maintain correct aspect ratio.

For audio, AAC whoops MP3's butt. Especially at the lower bitrates using the neroAacEnc encoder. I stick with low complexity (LC-ACC) bc the psp can't handle HE-AAC/HE2-AAC. The latter two are kinda like MP3pro/WMA (ie: half the bitrate for comparable quality). But that's if your system can decode them properly. 128kbps should be sufficient. Use 64kbps if you want smaller size.

For the container. I never liked MKV. I prefer AVI but will settle for MP4 for ipod/psp support. All the confusing technical MP4 info for profiles and levels can be found here: http://en.wikipedia.org/wiki/H.264
For compatibilty, I stick with "Main" profile and "Level 3.1". Psp can't handle level 4 and above. >.<

Just download the ccpc pack which contains all the codecs for anime viewing, just google it to find out more.

CCCP hands down.
and for the one in a billion files that the CCCP won't play, use VLC.

or for linux, SMplayer

Storm Codec Pack. It's very similar to CCCP, but even better imo. Or at least I managed to find a few movie clips that weren't supported by CCCP, but were by Storm Codec.

And if Mediaplayer Classic can't play it, I use VLC.

The best one is the CCCP (combined community codec pack) hands down. Its the only one I use. http://www.cccp-project.net/

Personally... if i were you, i wouldn't simply ask what codecs should be downloaded and used but instead, ask what codecs are needed. I don't need a lot of codecs because not all codecs are needed. I warn that sometimes you might get bad codecs that may make your computer slow down a considerable amount (happened to me once... uninstalled the codec cause it kept on running even though i wasn't using it). When something pops up that tells you that you need a certain codec, just download it. I don't think you should download everything though.

CCCP ftw

CCCP for most of the movie container and codec.
Real alternative for Real media files.
Quicktime alternative for quicktime files.
all also use media player classic. (no resource hogging)

If all dont work then use VLC player (note VLC also play most of the coded wmv files which need to register ^-^ which you dont have)

As for codec of choice i use H264/MKV with AAC or Vorbis or H264/MP4 with AAC. Both are good for smaller sized and HD.

Im one of the newer (but active people) of boxtorrents, and boy is that website a HUGE FAN of h264.

So yeah, id go for that.

File size might be bigger, but that codec + big resolution with big wide screen monitor = Satisfaction

Here's what I use:

Combined Codec Community Pack - codec pack
OGG DirectShow Filter
AC3 Filter
DVobSub
FFDShow - puts everthing together audio/video options
Quicktime - to play .mp4 and quicktime/apple files
Windows media player - to play simple videos .avi
Media player classic - to play .ogm .mkv with/without subs and others that wont work on the above players

I agree with any one who said that K-Lite codec pack is good.
i agree with anyone who said mkv container is good
i cant agree with anyone who said cccp pack is good because ive never used it and i dont know anything about it.

i choose to use k-lite because it has every thing, is quick, easy and has media player classic , which is the best player for videos.

Recently i just downloaded triple C, and its like every codec out there, so i'd recomend that.

I've had no problems with K-Lite Codec Pack.

I'd heartily recommend it along with the others who have.