Someone asked about descent video compression and file size in another post, but I didn’t have time to answer the post when I read it, and now I can’t find the post. Whoever you are, this will probably do the trick for you.
In the animation settings (F10KEY) and in the format pallet, select QuickTime. The Compression Settings window should appear, if not, select the Set Codec button. In Compression Type drop down menu select Sorenson Video 3 and adjust the data rate to the desired speed. Lower data rates = lower quality and smaller file sizes. I have read many good things about the H.264 codec which is available as an option if you’re running QuickTime7 but it crashes Blender every time I try to use it, probably because I don’t have QT7 Pro. But, never fear, Sorenson 3 will do an excellent job for you.
Alternately, if you select AVI Codec instead of Quicktime, you can access the DivX codec from the popup window as long as you have DivX installed on your system. DivX makes for impressive file sizes but I am somewhat annoyed by the moderately grainy/noisy files that it creates. Sometimes this can look really cool, but often it is undesirable. Plus, the free version tags your video file with a vanishing DivX logo. Besides, QuickTime is an all around more robust system, is the format of choice among most video professionals, is free to download and update, doesn’t tag your images with a logo, and is utilized by in some form or another by most video devices, so I always opt in for it.
Hope this helps.