its useful in some ways, and not in others, depends what you want from your video files.
me personally I run a home network and have NAS (network attached storage) so I use XviD and DivX to convert DVD's to high quality AVI files and the compression the Mpeg4 format gives means the movies are much smaller than the orriginal VOB files. The playback is compatible with both my stand alone DivX dvd player, media centre pc, xp pc's, and xboxes.
Generally its used on the internet, if you have a dvd movie and want to share it (ilegally) then you can convert it to XviD or DivX and put it on one CD so a 700mb download is better than 4.3gb for a dvd-R
generally to achieve 700mb they drop the audio to 2 chanel and ditch the DTS or AC3 6 chanel used for surround in digital form. they also ditch the non necessary subtitles and movie extra's. this saves enough space to maintain a good quality movie (not perfect though).
personally I need to keep the digital sound and dont like the compromise on picture quality over sound but I do want to save space so the format is good for me to make 1.3 - 2.3 gb movies in full resolution (usually 720 x 576) and include only one digital sound track and only forced subtitles.
as I said, depends on what you use it for to decide if its useful.
One thing to note, Microsoft are pushing their own version of mpeg4 which is the WMV9 format. This is evident in the Windows MCE eddition in that its hard to get a resonable XviDcodec to display great results etc (but it is possible). The reason microsoft are doing this is their version supports DRM (Digital Rights management) which basically allows the media to be license controlled and cut down on piracy, its a good effort but kinda futile as while other formats exist and people can re-capture or convert audio/Video its only prevents people who have no intention of copying anyway, still by doing this they limit it on their OS which is clearly widely used.
