It's basically software that allows you to play AVI video files. Once you download the Divx codec from their website, you should be able to play AVI files in Windows Media Player.
It would probably help at this point to explain a couple of things:
AVI/MPEG/WMV/MOV etc are methods of compressing and encoding video and audio data into a single file. They each require a slightly different set of rules to decode the compressed data.
Windows (and other) Media Players have a certain number of methods for decompression and play built into them, but more importantly, they are extensible meaning that other methods can be bolted in to add new functionality (new methods of decompression).
These bolt-ins are called codecs. Thus, the reason that you couldn't play the video was that your media player lacked the right codec (in this case one called DivX). A lot of people (myself included) have experienced this before, and so were easily able to direct you to the correct web site to download the DivX codec.
