There are a lot of programs out there for compressing video, but I particularly recommend VisualHub (US$ 25), for OS X.

2012 note: VisualHub is now free, but won’t be supported past OS X Snow Leopard.

I prefer it even over fancier alternatives like Apple’s Compressor, not because of any special capabilities, but because of its clean interface and the straightforward way it presents your compression options. It’s especially useful it you’d like to fit your movie within a given file size–this is a common task, but too many programs require you to get there by trial and error.

(If anyone can recommend a good Windows program with the same ease-of-use factor, please do, and I’ll add a tutorial for it.)

Step 1. Drag your movie into the VisualHub window:

Step 2. Choose the MP4 tab and check H264 Encoding and Hint for Streaming. For very small file sizes, check 320 Pixels Wide too:

(The H.264 codec gives great results at tiny file sizes. It’s not meant for use in video production, though, so always keep your master copies in DV or another high-quality format.)

Step 3. If you’d like to specify a target file size, click on Advanced:

Step 4. Check Fit each video in… and type in a number:

Step 5. Click Start to begin encoding: