Don't sway there's an open source MKV converter that will take care of your AVIs.
As of this post there's simply no better compressed video format than Matroska.
Enter HandBrake, an open source (GPL-licensed) multiplatform video converter available for Mac OS X, GNU/Linux and Windows.
Remember. I'm just showing you a tool to help you get more disk space. I am not telling you to download pirated Hi-Def DVD rips out in the Internet and have the file size get shrank by this tool. Also, what I just said is not a reverse psychology thingy. ;)
EDIT: Been using MKV for more than a year and I never had the slightest idea that MKV was indeed an open format. Thanks robux4!