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Blender is not only one of the best graphics programs from the open source world, it’s one of the best open source applications of any kind. Widely used in the video and animation communities, it’s great for 3D modeling, animation, rendering, and playback. You can also use it on Windows, Mac or Linux systems. Take a look at a character in progress above.
In a blog post yesterday I mentioned SnagIt—a great tool for doing screen captures. However, even people who regularly use SnagIt often don’t realize that it’s great for capturing videos of tasks and applications performed on your computer. For a demonstration of a software application or process, for example, it’s more than good enough. In the reader comments to my post above, you’ll find out how to get a version of SnagIt for free.
MetaMorf is a slick little application for morphing effects that you can incorporate with videos and animations. It’s also a lot of fun to fool around with, as is Blender.
Prism is a free application that will let you convert video from one format to virtually any other popular format. You can even preview the output to guage whether you have all the encoding right.

If you send video of any kind out on a network basis, look into Xvid. This free application compresses video files, which are often huge and unwieldy in size. I’ve gotten better than 100-to-1 compression ratios with Xvid.