Find out what codecs you can currently use:

For video

$ mencoder -ovc help
MEncoder SVN-r29237-4.4.1 (C) 2000-2009 MPlayer Team

Available codecs:
	copy     - frame copy, without re-encoding. Doesn't work with filters.
	frameno  - special audio-only file for 3-pass encoding, see DOCS.
	raw      - uncompressed video. Use fourcc option to set format explicitly.
	nuv      - nuppel video
	lavc     - libavcodec codecs - best quality!
	vfw      - VfW DLLs, read DOCS/HTML/en/encoding-guide.html.
	qtvideo  - QuickTime DLLs, currently only SVQ1/3 are supported.
	xvid     - XviD encoding
	x264     - H.264 encoding

For audio

$ mencoder -oac help
MEncoder SVN-r29237-4.4.1 (C) 2000-2009 MPlayer Team

Available codecs:
	copy     - frame copy, without re-encoding (useful for AC3)
	pcm      - uncompressed PCM audio
	mp3lame  - cbr/abr/vbr MP3 using libmp3lame
	lavc     - FFmpeg audio encoder (MP2, AC3, ...)
	faac     - FAAC AAC audio encoder

Turn a MPG file into an AVI file:

$ mencoder video.mpg -o video.avi -ovc lavc -oac lavc

Mantain quality and obtain smaller file size, use the two-pass mode:

$ mencoder dvd:// -oac mp3lame -ovc xvid -xvidencopts pass=1 -o /dev/nullmencoder dvd:// -oac mp3lame -ovc xvid -xvidencopts pass=2:bitrate=800 -o output.avi

Convert a movie DVD to a standard 700MB AVI file:

$ mencoder dvd:// -ovc xvid -oac mp3lame -xvidencopts bitrate=-700000 -o file.avi

Join the files "1.avi" and "2.avi" into the joined file "joined.avi":

$ mencoder -oac copy -ovc copy -o joined.avi 1.avi 2.avi

Where:
-oac copy - copy the audio stream
-ovc copy - copy the video stream
-o joined.avi - output to file joined.avi

Re-encode .avi to get higher/louder volume:

$ mencoder input.avi -oac mp3lame -lameopts abr:br=192:vol=9 -ovc lavc -o output.avi