I took a video with my Canon A620 digital camera with a length of 3 min 40 seconds which gave an AVI - file of nearly 400 Mb (resolution 640 x 480)! The specs of the camera say that the AVI format is JPEG compressed. Is there a free compression program that handles this filetype efficiently? Randomly hopping on the internet for programs did not give the expected result . Please help.

Your file type is now video. There are multiple ways to compress it. What exactly do you want for the end result? Do you want a file to play on your computer, do you want to put it on a cd which you can play, do you want to burn it to a dvd to play on a standard dvd player?????

I would like to do a loseless compression since the quality of the images is not so good (due to bad focussing), the output should be something that eventually ends up on a DVD (AVI or MPG or VOB...) for playing on a standard DVD player

Download a trial for Ulead Video Studio, Adobe Premiere Elements, and/or Vegas Movie Studio. Also check out TMPGenc. All are very good conversion programs. If you want to play on DVD, you will want to use MPEG2. You will want to use a bitrate somewhere between 8000, and 9000.

There are also many free avi to mpeg conversion softwares. Some do a pretty good job, and some just fair. But, if you plan on doing this with any frequency, you should look into one of the good all in one programs which will allow you to capture, edit, encode, and burn, all with the same software. All of the ones I listed have wizards, and manual controls which allow you to start off using the wizards, then go to manual controls for more freedom, as you learn the processes.