When you use 'Codecs' the output format for video is AVI. When you use 'Encoders' the output format for video is WMV. The difference between them is that Encoders use Microsoft Encoder Technologies and Codecs use third-party technologies like DivX for example.

Video compression using Codecs:

Applying no compression to the video stream is ideal if you intend to edit the video later.

If you intend to compress the video stream select a codec from the list of all the video codecs installed in your system. The selected codec will be responsible for compressing the video stream.

Output is AVI.

Video compression using Encoders:

Select an encoder from the list of video encoders installed in your system. The selected encoder will be responsible for compressing the video stream.

To better select an encoder read the detailed description and verify if that encoder matches what you'll record and how you intend to store it and share it.

Output is WMV.