Windows 7 will natively support a number of popular media formats, so that users don’t have to worry about finding, installing and downloading third-party codecs. This is an evolution in media support which is similar to the inclusion of native MPEG-2 playback in Windows Vista, providing the DVD playback functionality which was missing in Windows XP.
Microsoft appears to have finally conceded that the vast majority of people are watching downloaded stuff in DivX or Xvid -- possibly a realisation driven by the enormous amount of telemetry data it has collected from users of Vista that it never had access to through XP. It has stopped short of bundling Adobe Flash support into Windows, though, as it develops its own Silverlight technology.
Windows 7 will also support H.264 video and AAC audio. The support for AAC will be welcome news for people with music and video that has been encoded in Apple iTunes, as Windows 7 will be able to play all iTunes media through Windows Media Player.Unfortunately, this won't apply to media that has been purchased from Apple's iTunes store, because Windows 7 can't decode the Apple FairPlay DRM, which Apple refuses to license to anyone else.