Using video compression
Raw video is very large and consumes a lot of disk space, so usually video compression is used to decrease the size of the video. To enable video compression, the video mode must be set to a mode other than direct stream copy, and a codec must be chosen in the Video Compression dialog. This codec is then used to compress the video.
There are two types of video compression, lossy and lossless. Lossless compression means that the compressed video is exactly the same quality as the original, whereas lossy compression discards less important portions of the video to reduce size. The advantage of lossless compression is that it preserves the video exactly; lossy compression lowers the quality a bit, but typically gets much better compression. Typically a lossless codec will only compress video up to around 3:1, whereas a lossy codec can get as much as 100:1.
When creating intermediate video, prefer using either lossless video compression or video compression that is amenable to editing, i.e. key frame only and higher quality over compression ratio. It is best to work with higher quality video and wait until the very end to apply the final video codec with the desired compression ratio. For instance, you might use 720x480 video compressed with DV during production, and in the final pass, reduce to 320x240 and encode with an MPEG-4 based codec.
Remember that for anyone to play the videos that you create, they must have a video codec which can decompress the video. For instance, if you use Huffyuv to encode, the recipient of the video needs to have Huffyuv or another compatible codec installed to play it. For this reason, it is best to stick with video codecs that are installed on most systems or are easily obtained. You can also use an external tool to encode to MPEG, which is playable on most modern systems, even those not running Microsoft Windows.
If you have video hardware installed that also comes with a video codec, videos created by it will most likely not be playable by anyone who doesn't have the same hardware. For instance, if you use a FooBar video card to capture in FooBar Motion format, probably only those who have FooBar video cards will be able to play it. Occasionally, the hardware vendor will have a software decoder available for download on their website that can be used to play the video on systems that lack the hardware.
Multithreaded video compression
By accessing the Preferences dialog via Options > Preferences, you can access the Threading section. In the Threading section, you can control the number of threads used for video compression. Using threads for video compression allows the compression to run in parallel with other stages of the pipeline, which can increase performance with systems that have multiple CPUs or CPUs with multiple cores.
The default is zero, which runs the video compression inline with the rest of the video stages. Changing this to 1 creates a separate thread to run the video compressor. Values greater than one are not yet supported.
Multithreaded video compression with one thread should be compatible with most video codecs, but if you have problems, you may need to disable threaded compression. It's also not always guaranteed that it is faster overall; you can open the real-time profiler in the View menu before starting the operation to profile the rendering pipeline and determine if the video codec is actually running in parallel with other operations or if some other stage is the bottleneck.
Using audio compression
You can also reduce the size of the audio as well by using an audio codec to apply compression. Use the Audio Compression dialog to select an audio codec and a compression format. Audio compression ratios typically vary from around 3:1 to 10:1.
Similar cautions apply to audio compression as for video compression. When producing final compressed audio, try to choose widely decodeable formats where the audio codecs are either easy to get or often already installed. Such formats include adaptive pulse-code modulation (ADPCM) and MPEG audio layer III (MP3).
Because audio is much smaller than video, and because compressed audio edits even more poorly than compressed video, it is best to capture and do intermediate processing with uncompressed audio (PCM). Wait until the very last step to compress the audio, and try to avoid recompressing audio when possible.