I ripped a DVD and it put it in "Protected MPEG-4" format. I still don't know what the protected part means, but it seems to take up a tad more space.
The movie is 1:48 long and in 464 resolution in H.264. It takes up 1.44gb and looks like DVD quality!
For some reason, I feel like the 720p movies on iTunes are smaller than 1gb per movie.