Use either DivX or XviD (whereas XviD is free, open source and faster than DivX).
You'll have to find the correct bitrate yourself, but you might want to start around 1200 kbps.
Download the XviD codec
Remember that it's pretty pointless to use a good compression method for video if you just end up using something like PCM wave for audio. Use MP3 for the audio compression.