Adding movies to PowerPoint presentation is as easy as inserting a picture. "Movies" are desktop video files with formats such as AVI, QuickTime, and MPEG, and file extensions such as .avi, .wmv, .mov, .qt, .mpg, and .mpeg. An animated GIF file always has a .gif file extension.

Adding a AVI, MPEG, Windows Media Video, and Animated GIF in PowerPoint

On the Insert menu, point to Movies and Sounds, click Movie from File, locate the folder that contains the file you want, and then double-click the file.

Note:  A movie or .gif file that you've added to Clip Organizer is found in the Clip Organizer folder within the My Pictures folder on your hard disk. Or, go to the original location for these files.

When a message is displayed, do one of the following:

• To play the movie or GIF automatically when you go to the slide, click Automatically.
• To play the movie or GIF only when you click it, click When Clicked.

Note: WMV can produce very small file sizes and if the videos contain real world photography, dithering or gradient fills, the file size may be significantly smaller than TSCC-encoded AVI files.

Adding a Quicktime Movie (.mov) in PowerPoint (Windows)

1. Open the movie file from your desktop to see if you have another application installed that will play the file. If you can play the movie, continue with this task.

   If you don't have a program that will play the movie, try downloading the appropriate QuickTime program from the Apple Computer, Inc., Web site, and proceed with this task.

2. Display the slide you want the movie on in PowerPoint, and on the Slide Show menu, point to Action Buttons, then select the Movie action button.
3. Draw a button on the slide. The Action Settings dialog box appears; click Run program and then click Browse. 
4. In the Browse dialog box, change Files of type to All Files. Then browse to your movie file and click OK.
5. Click OK in the Action Settings dialog box.

During a presentation, when you get to the slide with the movie object on it, click the movie object to launch the application that plays the movie. If the application doesn't automatically play the movie, you will have to click a command within the application to launch the movie.

Problem? Try Using Windows Media Player

If you try to insert a movie and you get a message saying that Microsoft PowerPoint can't insert the file, try inserting the movie to play in Windows Media Player. 

1. In Windows, launch Windows Media Player (from the Start button, on the Accessories submenu).
2. On the File menu in Windows Media Player, click Open, and then type the path or browse for the file you want to insert, and click OK.
   • If the movie opens and plays, complete the remaining steps in this task.
   • If the movie cannot play, then it won't play when you open the Windows Media Player in PowerPoint, so don't complete this task. You can consult Windows Media Player Help to try to troubleshoot the problem. Also, in PowerPoint, search on "Troubleshoot movies" in the Ask a Question box on the menu bar to get more suggestions.
3. Display the slide you want the movie on in PowerPoint, and on the Insert menu, click Object.
4. Under Object Type, click Media Clip, and make sure Create new is selected. If you want the movie to display as an icon, select the Display as icon check box.
5. Click OK.
6. On the Insert Clip menu in Windows Media Player, click Video for Windows.
7. In the Files of type list, select All Files, select the file, and then click Open.
8. To play it, click the Play button just below the menu bar, on the upper left; to insert it onto your slide, click outside the movie frame.

(partially from http://office.microsoft.com/assistance/PowerPoint )