The Audio Video Interleaved, or AVI, video format is a Windows video format. Up until QuickTime 3.0 there was no Mac program that would play AVI files. The Indeo Video extension, or codec, is from Intel's web site. Indeo Video Interactive 4.1 codecs are not yet available for the MacOS and therefore some AVI's cannot be played on your Mac. The choice between Lossless and Lossy depend on your goals for the movie.
Lossless compression preserves all the data.
What goes in it is exactly what comes out of it. Lossy compression eliminates some of the data. This normally results in a lower quality movie. Spatial compression is applied to a single frame and can be lossless or lossy. Temporal compression is where differences between frames are identified and only the differences are stored.