if i'm just watching, i don't mind as long as the subs clear enough to read. but for my collection, i prefer .avi. but if the quality is good in .mpg, then it will be in my collection.
maybe because .avi good in quality and can be play in almost any player. the file size are big. my Naruto collection in PC consume almost 60GB and other anime that i just start collecting consume 20GB from total 240GB. Oh, the other GB are for games, songs, video clips, pictures, my programming assignments and drama.