How can I watch an AVI file on my iPhone? I understand that the bundled apps for iPhone does not support AVI files. However, I have lots of these files which I want to watch on my iPhone. 

Can you suggest a streamlined, automatic way of doing this? I have never watched videos on my iPhone or iTunes before and would appreciate step by step answers.
Use HandBrake to easily convert the AVI files to an iPhone compatible format then sync those converted files with your iPhone

Or, email/post them to Posterous, and they'll be auto-converted into a format watchable on your iPhone