One of the first things I wanted to do once I got my Droid was to try out the display by watching high-res videos. Unfortunately, mostly all my movies are in DivX or Xvid formats and will not work without converting them. I am a Ubuntu Linux user so I knew I would be able to find some software to do it, but its not always easy finding a simple, easy to use program. After tying a few,
Arista Transcoder is definitely easy and works great. I would suggest converting using the "Apple iPod" device format but try it out and see what works best for you.
If you are a Mac/Windows user try out
Handbrake (its free open-source software) and check out
androidforums.com for the conversion instructions.
Arista Transcoder on Ubuntu Linux
To Transfer your videos make sure to mount your SD card. Once this is complete just create a "Videos" directory and copy the files over.
Once the files are copied to the SD card you should be able to open them though the gallery.
Converted Videos on Motorola Droid
Please note that acceptable video formats are: 30fps playback, MPEG-4, H.263, H.264