Broadly, there are two types of codecs out there: lossy and lossless. As the name implies, the lossy codecs shrink the video file dramatically by dropping detail, like creating a JPEG image from a RAW photo. For our purposes, Spark, Squeeze, and ON2VP6 are the most important of the lossy codecs, because they the ones used to create the FLV file used in Flash. The result is a very small file size.
Lossless codecs lose very little information, if any, and the resulting files are quite large. When it comes to Flash video, large is a good thing before conversion, and a really bad thing at run time.
The basic rule of thumb for preparing videos for Flash is this: Start with as much detail as you can get. Make sure your original video is encoded with a lossless codec before you begin to convert it to FLV for Flash distribution. If you receive a video that isn’t losslessly compressed, seriously consider returning it and asking the client for a cleaner copy. This may sound a little harsh, but if you prepare an FLV from a video compressed with a lossy codec, quality goes out the window. Compressing an already-degraded video into FLV is like opening a JPEG in Photoshop, and saving it over itself with the quality slider pulled down to ten percent or so; recognizable at best, a jumbled mess of pixels at worst. In a nutshell, the crystal clear videos you see from movie and record companies likely all started life with lossless encoding. The pixelated messes of Flash Video you sometimes see on the web had the life squeezed out of them before they even hit the FLV converter