Playing movies on your PC is entirely down to what "codecs" you have installed on your PC. These are responsible for decoding the movie, and displaying it on the screen. Each type of movie will use it's own codec. You can in theory play any type of you want, as long as you have the codec for it. You can try downloading the Microsoft codec pack from here:
Codec Installation Packages for IT Professionals (scroll down to the bottom, and click on "Download Now" at the very bottom). This codec pack I believe include an AVI codec.
EDIT: Marked as Answered.