By free you don't mean streaming... streaming costs money because you have to pay per usage and subscribe to a CDN. What you are talking about is progressive downloading. If I wanted to put video on the web, the easiest, most compatible way is through flash/flv. avi is huge and mov requires you to install the quicktime plug in which tries to make you download a bunch of stuff you don't need. Flash does also require a plugin but for the most part comes preinstalled on your target's machine.
I use this script pretty consistently. The full (and free) package you can download comes with a player built in. I use my own cause I'm a snooty designer, but this one is perfectly fine
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