H.264 uses motion estimation to not only determine what pixels changed but also if they move on the screen. (think of that person walking across the screen). This takes a lot of cpu time to compute but give you better compresion. On play back the cpu load is nomially higher, but there's less data to pull off the harddrive so your battery savings is better..... So if you have the time then H.264 from the isquint implementation is the way to go.
iSquint Your iPod Video