This paper discusses motion estimation in the H.264/AVC encoder, highlighting its advantages over MPEG standards in image quality and compression efficiency, while addressing the complexities involved. The authors propose a hardware/software co-simulation methodology using MATLAB and Xilinx FPGA Spartan 3E to optimize the motion estimation algorithm, focusing on various scanning methods and co-design approaches. The results demonstrate improved performance and reduced power consumption in real-time applications, along with a peak signal-to-noise ratio of 45.57 dB.