Wayne has multiple copies of all his movies, in different video formats -- .MOV, .M4V, .WMV, .AVI, .MP4 -- and is wondering which one he should keep. Leo says it's not that one is better than another, it really depends on how he's encoded them. For example a low quality .M4V will look worse than a high quality .AVI. If all the settings were the same, then Leo would choose to go with H.264, or .M4V files.
Wayne also has 2,700 files named cache.MOV, and Leo says he can get rid of all of those since the .M4V's are named properly. Leo points out that .MOV and .AVI are actually "wrapper" formats, meaning they can contain H.264 or some other encoding format. In general, there are more bad quicktime movie (MOV) formats than good ones.
If, however, these files are video clips from a camera, it is not recommended that he convert them to another format. Any transcoding to another format, even if it's a better one, will degrade the quality. So even if the files from his camera are .AVI or .MOV, he should leave them because that's the original format from the camera.