To get a complete discussion of video file formats, see Video File Formats. All formats mentioned there (MPG, AVI, RAM, MOV) will play in PowerPoint, though, like sound files, they're not all on equal footing (see below). Remember that video files must be handled and transfered separately - embedding them in your PowerPoint presentation does not embed them in the PowerPoint file, but merely places a reference to the video file in the presentation - the video file must exist separately, and the pathway to the file must be identical when run as it was when the slide was created.
In addition, since it's generally assumed you will be creating your own videos for insertion, care must be taken with various concerns unique to digital video - compression and codecs, screen size, file size, etc. - see the discussion of choices under Movie! in Pinnacle Studio.
As with certain sound formats, care must be used when inserting Real Media (RAM) files, since they require Real Player to run which must be present on the computer running the PowerPoint presentation. As mentioned in Sound and Music, call of Real Player halts execution of the presentation until the file is played, causing PowerPoint animation settings to do unpredictable things if used in conjunction with the video files. In contrast, MOV (beginning with PowerPoint 2000), MPG and AVI files are handled seamlessly from within PowerPoint, which does not disturb other settings. AVI files, unfortunately, have special problems associated with compression algorithms (see Video File Formats), so care must be taken to be sure files will play if you intend for the presentation to run on a computer other than your own.
Video and sound are handled almost identically in PowerPoint, except, of course, that video files cannot be used as start-up sounds (which can only be sound WAV files) and background from CDs. It's easiest to use the "Insert/Movies and Sounds" option from the menu.
"Movies from Gallery" is a misnomer - there are virtually no video files in the "Movies from Gallery" - they're generally animated GIFs. The selection there is quite limited, and most will add little to your PowerPoint presentation. It is best to use your own video, digitized using Pinnacle Studio or other capture systems. You may use either video you have shot yourself, or, if you have permission for use or such use is covered under "Fair Use", captured or downloaded videos from other sources.
Videos can be used to span several PowerPoint slides (possibly as an embedded commentary). Use the "Multimedia Settings" tab in "Custom Animation" - select the media file, and click on "Continue slide show" and enter the number of slides you want the video to span. This, of course, is only meaningful if you intend to allow the video to dictate the speed of execution of the slides, by prompting the presenter, or by automatic slide advancement.
All other custom animation settings are also available with videos - see Animations.