What codecs are supported on Windows Phone 7? This question comes up frequently, so here we’ve listed them for reference. Please note that this information contains pre-release information and is subject to change in future releases.
Audio: WAV, MP3, WMA, AAC-LC, HE-AAC v1, HE-AAC v2, AMR-NB
Video: WMV (VC1) Simple, Main and Advanced Profiles
MPEG-4 Part 2 – Simple
MPEG-4 Part 10 (MPEG-4 AVC, H.264) Level 3.0 – Baseline Profile
MPEG-4 Part 10 (MPEG-4 AVC, H.264) Level 3.0 – Main Profile
MPEG-4 Part 10 (MPEG-4 AVC, H.264) Level 3.0 – High Profile
Images: JPEG, PNG, GIF (both GIF87a and GIF89a), BMP, TIF
If you want more information about specific containers, and supported scenarios, refer Supported Media Codecs for Windows Phone on MSDN.