DivX is not to be confused with DIVX, an unrelated attempt at a new DVD rental system employed by the US retailer Circuit City. Initially the DivX codec was called DivX ;-), including the smiley emoticon, as a sarcastic reference to the failed DIVX system.
A typical movie on DVD is 6 Gigabytes in size; with DivX this can be compressed to around 600 Megabytes which fits on a CD-ROM. The loss in quality is minor, except for scenes with lots of action. Various programs are available which can produce a DivX file from a normal video DVD (this process is known as "ripping"). The resulting file can then be stored on hard disk, burned on CD-R or DVD-R, or (illegally) be shared on peer-to-peer networks.
DivX 3.11 and earlier versions generally refer to a hacked version of the Microsoft MPEG-4 layer video codec, extracted around 1999 by French hacker Jerome Rota. The Microsoft codec, originally created for the compression of .asf files, was altered to allow compression to .avi files in the DivX codec. Rota's company DivXNetworks, Inc. later produced a clean room version of the codec, thus avoiding potential patent problems with Microsoft. DivXNetworks has applied for a patent for their new codec, which is fully MPEG-4 compliant.
The current version of the DivX codec code (version 5.1) is available through their web site for Windows, Linux, and Macintosh operating systems. It is neither Free Software nor Open Source, but a free implementation of the codec known as XviD exists.
Also see www.divx.com