Xvid was was created by many of the programmers who worked on the Divx project when it was open source. When divx went commerical and Divx Inc was launched Xvid, which is just Divx spelt backwards, was born.
Xvid is superior to the Divx codec however its success was guaranteed when using it for downloaded movies and tv shows because it is open source and therefore free for anybody to use.
The vast majority of all movie and tv show videos you download off the web will utilise the Xvid codec.