this is what i found out from the internet.
Play VIdeos in MPEG-4 H.264
The G1 has no built-in video player. That's what the Android Market is for. When we were testing the phone, there was only one true video playback program available: Video Player. And while this program can only play MPEG-4 movie files, we should soon see other video-playing programs that will be able to handle all sorts of codecs. However, even when these options become available, you'll still want to play your movies in MPEG-4 H.264 compression whenever possible. This is because the G1 has built-in hardware acceleration that makes this specific video format run extra smooth. Future programs will probably run Divx and Xvid and all those great files you've collected from Bittorrent, but the programs' on-the-fly decryption and viewing will be far more taxing on the software, which could mean lags.