What settings should I use?
Start with the defaults. We've put a lot of thought into our default settings, so you'll probably be OK if you stick close to those.
Generally, you want to adjust the following settings.
Choose the right codecs for your target application. All of our codecs play back on the web, but H.264 has the widest compatibility and the best quality. If that's what you're looking for, use H.264 + AAC (or maybe MP3). At the moment, it's also your best bet for mobile device compatibility. If you want something with no licensing issues VP8 + Vorbis is pretty good (though new), and Theora + Vorbis is a more established option.
Determine a target resolution, a strategy for aspect ratio conversion, and whether or not you want to upscale videos that are smaller than your target. (It's often smart to leave smaller videos small, and scale them within your player. That saves you kbits and bandwidth.)
After that, pick a video bitrate. Bitrate is the most important factor in determining how good a video will look. We recommend setting a target quality rather than a bitrate, since it isn't efficient to apply the same bitrate to videos of different sizes/shapes/content. Pick a quality setting based on the quality/size tradeoff: quality 3 looks quite good (better than most web video), quality 4 looks great, and quality 5 is near-lossless. Choose quality 2 if you want decent video in a small bitrate, and quality 1 for low bandwidth situations. Audio quality is also worth considering; quality 2-3 is usually pretty good, and consider quality 4 if music or soundtrack fidelity is important.
Beyond that, other settings are really optional. You can probably ignore most of them, and some of them might even be detrimental to the quality of your video. For example, forcing video to a different frame rate can make the video look choppy, and manually setting the audio sample rate can cause encoding errors.
See our API docs for more.