What does pygame.Movie mean by `an MPEG file'?

[accolades]

An MPEG is a type of video file, you are correct in that assumption.
Things such as DivX and Xvid are called codec's
(COmpressor/DECompressor) codec's are used to conserve disk space, raw
video files are very large.

It is quite likely that PyGame does not support the compression being
used by your videos. For more information on multimedia files and
codecs, check out:

http://www.videohelp.com/

As for the types of compression (if any) that PyGame supports, I'll
have to look into that.