The iPhone doesn't play videos in the xvid format. But, by using VLC player, you can easily convert your xvid video to an iPhone-playable format:

1. You need to Download and install VLC Player if you don't have it already. Open it up.

2. Choose File -> Wizard. This should bring up the Streaming/Transcoding Wizard.

3. Choose "Transcode/Save To File". Click "Next"

4. Make sure "Select a Stream" is selected and click "Choose". Select your xvid file by clicking "Browse". Click Next.

5. Click in the "Transcode Video" box and select "MPEG-4 Video" for your Codec. Choose a bitrate (I chose 512... I don't think 3072 will work)

5. Click in the "Transcode Audio" box and select "MPEG 4 Audio" for your Codec. Choose a bitrate (I chose 128... I don't think anything larger than 128 will work). Click "Next"

6. For Encapsulation Format, choose "MP4". Click "Next"

7. Select the location and name of the file. Make sure and save it with the extension .mp4

8. Click "Finish" and wait for it to complete.

9. Once it is done, open up iTunes, click on "Movies", and drag it there. Make sure you select the movie in your iPhone sync settings or else it won't be transferred to your iPhone.