Using HandBrake

• 1). Download and launch the free utility HandBrake. After opening, HandBrake will immediately ask you for the conversion source. Select the AVI file you wish to convert and click "Open."
  
  
• 2). Select a video conversion template from the left column. Two options are available for iPhone (which also works for iPod Touch)--choose either high or low quality depending on your preference.
  
  
• 3). Click on "Start" to begin the conversion process. This might take some time depending on your computer's processing power and the length of the video. The converted file is saved in the same folder as the original with the same name but with a .m4v file extension.
  
  
• 4). Drag the newly converted file to your iTunes library to import it to your iPod Touch.
  
  

Using QuickTime

• 1). Launch QuickTime. Select "Open" from the "File" menu and select the AVI file to convert.
  
  
• 2). Select "Save As" from the "File" menu and choose "iPhone" from the "File Type" drop-down menu. iPhone and iPod Touch files are identical in format. If this option isn't available, you must purchase QuickTime 7 Pro.
  
  
• 3). Drag the newly converted file to your iTunes library to import it to your iPod Touch.