They named it (DivX spelled backward) as a jab at the commercial entity. Xvid quickly surpassed DivX in quality and efficiency, becoming the preferred choice for the "scene" (the underground community of digital release groups).
The Xvid codec is commonly used in a variety of applications, including:
Eventually, the company behind DivX moved to a commercial model, charging for their "Pro" version and bundling adware. The open-source community was unhappy. In 2001, a group of developers decided to take the open-source OpenDivX project, fix its bugs, optimize it, and rebrand it.
Xvid represents a unique moment in media technology where a legally contested, community-developed codec successfully challenged both a proprietary commercial product (DivX) and a standard's patent pool (MPEG-4). Technically, it optimized MPEG-4 ASP to its theoretical limits. Culturally, it enabled the peer-to-peer video revolution. While H.264/AVC and later H.265/HEVC have superseded it for most applications, Xvid’s architecture—particularly its motion compensation options—influenced subsequent open codecs like VP8 and x264. The codec remains a functioning artifact of the early internet video era and a case study in open-source reverse engineering.