You have two different problems. I take it that you want to capture and compress in the same procedure to get the smallest possible disk storage size on initial capture. That is not really going to be easy. To give you an exact answer I would need to know your capture device/method and your capture software.
Problem #1:
Where and how to use DIVX or XVID digital compression software (called a Video Codec). Codec stands for COmpression/DECompression. Many companies give away the Decoding or playback software but charge money for the encoding or compression piece, which you need. You need to change your capture software to select this desired encoding scheme. This is usually done in one of the software's preference or capture settings. You will find the selection available after you install the CODEC.
Problem #2:
I will make some assumptions as to your situation. In any condition, what I will put down here should supply. You are capturing from an analog video source (VCR) through a USB or PCI capture card onto your computer. You are using bundled software that came with the capture device.
You need to see if your capture software will allow you to change the capture compression scheme. You need to change the size of the video that you are capturing.
Your next challenge is to be able to capture and compress video in "real time", not an easy feat to do without suffering from "dropped frames". What is "real time" and "dropped frames"? "Real time" is normal viewing speed. "Dropped frames" is the number of frames not captured. The NTSC frame rate is roughly 30 full frames per second (actually 59.94 half-frames per second). As fast as new computers are you will need a much faster dedicated capture system to perform these 2 compute intensive tasks at the same time. VHS full frame video is 30 640X400 per second. 10 seconds of video is 300 video images. So that would say that each frame is >1 megs in size. That tells me that your capture software is probably working at 720X600 Hi Res DVD images with no or little compression applied and a Hi quality Audio track.
DVD video is a compressed format, but not as compressed as Divx or Xvid. Take your 10 seconds of video and try and store it on DVD or make a DVD image. See how long it takes.
You can figure that that is the time that your computer would need to compress the video "real time". If your computer can compress and create the DVD/Image in under 5 seconds then you stand a chance. But figure that DIVX or XVID is targeted for streaming video or downloading and compress at a much greater rate. Also these compression (Video CODEC) programs are much more lossy and take longer to perform. So figure that your computer needs to be able to generate the DVD/image 10 seconds of video in 2-3 seconds max without loss of frames or image quality. Now you are begining to see the problem. Life is a series of tradeoffs and video capturing is full of them.
Next change the software capture perferences. Set the image size to 320X200 or less. Change the frame rate to 15 or less. Your software may not let you select a Video CODEC if so try it without one and with one. Select a 8-bit mono audio capture rate. You will notice that the file size is much smaller. But the image quality may not be to your satisfication. You may or may not also be suffering from dropped frames.
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Helpful hints:
1. Keep a seperate partition or drive for capturing. Target that area in your capture software.
2. Before capturing, eformat or defragment the capture drive. This will keep a clean area for capturing and prevent dropped frames.
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Good luck,
Hope this helps (sorry about the misspelled words. I have an injured right hand and spell checking is not working on my laptop.