Beginner's Guide to Adobe Flash/Video/Supported Codecs
When choosing to convert regular video to Flash Video, there are two basic codecs to keep in mind - each have different uses and strengths.
Keep Codec Dynamics in Mind
Codecs stand for Compression/Decompression - it is important to remember that neither of the primary Flash codecs are lossless - which means you will lose some data whenever you encode your source video into Flash. In order to shrink the file size of video to allow for transmission over the internet, some data is thrown out, regardless of whatever method you use. This is why you should avoid double compression - in other words trying to compress a previously compressed video file - when creating Flash Video. If you try to double compress a video, you will end up losing more data than you would have if you used high quality video, without necessarily decreasing the file size significantly.
Sorensen Spark was the primary codec for Flash Video for Flash versions 6-7. Because it's been around longer, several more years in fact, it has a wider area of compatibility than the VP6 codec does. If your video is intended to be watched by the general public over the internet, it might not be a bad idea to use the Sorensen codec to encode your video. Because video encoded with the Sorenses codec will play on Flash Player versions 6 and later, it is ideal for reaching the broadest audience.
The On2 VP6 Vodec
With the advent of Flash 8, a new codec has been created that greatly improved encoding and playback of Flash Video. That codec is On2 VP6, and features much better compression and image quality than the Sorensen codec.
There is a drawback to using the new codec however, because users will only be able to watch video encoded with VP6 in Flash Player 8 or newer, and playback requires more processing power than previous codecs. Adobe even has specific size limits and bits per second limitations it recommends to avoid taxing the computers that are displaying your Flash video.
In the end, it is a matter of balancing availability versus file size and quality, so use whichever codec fits your desired project.