MPEG Encoding question

[SS5_Majin_Bebi]

I've noticed that alot of MPEG or MPG format music videos have outstanding quality at relatively low file sizes. How exactly is this achieved? A good example would be MeriC's "Traces of Insanity" and Abbadon Studios "NGE-Reminiscence". I'll be using TMPGenc as well. I have read the guides, its just that I'm not really all that close to understanding them yet, and I just want someone to put it quickly and simply for me. I'm still waging a mental debate as to whether I want to re-encode all my best AMV's into MPEG-1, or whether I want to leave them as AVI's.