Wii Transfer converts movies to use the Motion JPEG codec. The file sizes for this codec are often very large, so by default Wii Transfer uses a medium quality setting. You can adjust this by choosing a new value from the Quality popup in the Preferences window. Lower quality movies take up less space than higher quality ones, but the image and sound is less clear.
If the source movie is widescreen and wider than 640, Wii Transfer will automatically resize to 640 by 480 and letterbox the movie if necessary.