Do you mean the above youtube vid or what will a PS3 play.

With firmware above Ver 2.51 a PS3 will play Divx, Xvid (Avi is just the container) . I think the Divx one's have to be made using Divx Ver 5.0 or above.

I have never had any problems, just burn a Data disc with Nero and they play.
I don't bother with MP4 as they don't play on my Divx DVD player.