The basic DivX codec is free; the encoding and translation program they have is not. But the codec works with every AVI tool I've ever used it with. It is true that if you buy the DivX Pro bundle, you get some upgrades to the codec which gives options for better quality or smaller compression. This is all as of version 7, which is current (www.divx.com).

I'm pretty sure the free codec does put a small, short-lived watermark in the corner of the video, though. I don't know if the Pro codec does; I've got it, but I don't use it as much as I used to.

That said, it's quite true and I fully agree that XVid is every bit as good, and is free all the way through.

For the sake of completeness, I should mention that there are some good articles about codecs and video compression in general at Wikipedia. I recall at one time getting lost a few times in the sea of jargon associated with video compression (multi-pass, bit rate, color depth, all that good stuff).