AVI is an audio/video file format that supports streaming of multiple audio and video tracks. It contains a RIFF header, index for chunk offsets, and chunks that carry compressed audio/video data. Some key features of AVI include support on Windows and Mac, use for short video clips, and ability to use various codecs like Motion JPEG and MPEG. Benefits are wide compatibility without special hardware/software, high audio quality, and support for 256 colors and RLE compression.