Smaller pictures take less hard disk space. That's about the long and short of it. There's many different formats of video (MPEG2, MPEG4-ASP, MPEG4-AVC, VC-1, various sorts of WMV, and so on) and each newer one might take a little less space because it's more advanced, or might offer advantages at certain sizes, but your video is mainly getting smaller because when you convert it for your player, the pictures are getting smaller and lower quality.