See also KingJohns Guide re-compressing

Quick access, Virtual Dub > Video > Compression > Codec > DivX ;-)

Select the DivX MPEG-4 Fast-Motion or Low-Motion codec in the Video Compression window
Click on the "Configure" button.

The Fast-motion codec offers better quality in movies with a lot of action and if you use a lower bitrate. In most other cases, the Low-Motion codec offers better quality, but may increase the file size.

Keyframes
Increases, decreases the time needed to seek to a "keyframe" during forward/rewind operations this option also influences quality. Leaving it too high means seeking doesn't work correctly. Decreasing it usually helps. A figure between 1 and 5 usually works default is 10.

If you are using the Scene Detect Patch (improved quality), set this to a high value, like 999, to let the patch auto-detect where it is best to insert keyframes (i.e.. at scene changes).

Smoothness-Crispness
If you set this to 100% means the movie will contain very sharp, crisp pictures, but will cause skipping. Setting it to a lower value of 10%, will mean the picture is more blurry, but won't skip.

Data Rate
This is kind of difficult, depending on the quality of the source, leaving it at the default 910 seems to be just fine for most conversions, while 1200 will give you almost DVD quality (using the low-motion codec + scene detect patch).

A lower value will give a lower file size, and decreased quality, but will also cause skipping and freezing, where the sound keeps on going, but the video stops. Setting it too high will mean that your converted video is excellent, but the size is almost the same as the original VOB, and may also introduce skipping.

Recommendation
1500-3000 kbps for fast-motion and 1200+ for low-motion

You can use the various Bit-Rate Calculators to determine which bitrate suits you best, but most only work if you use the Low-Motion codec, as the Fast-Motion codec's bitrate is too variable for the bitrate calculators to work properly.

When you're finished, click OK.