I recommend "Xvid [.AVI] (mencoder)".
It depends on what you want to do with the movie, though. If you want it to be compatible with an iPod or AppleTV, you should probably use "H264 [.mp4] (mencoder)". I'm not 100% sure even that will be compatible with iPods or AppleTVs, though. It should, in theory, but I've never tried it.