In simple terms, a Video Compact Disc (VCD) is a cheap alternative to creating DVDs - a recognised format for digital video, many standalone DVD players and all computers with relevant software can play such discs. Given the comparatively small capacity of standard CD media (740MB), the quality clearly can't match that set by DVD films. However, given the right encoding tools and source footage, you can expect to surpass VHS quality with the added advantage of no loss in quality from excessive playback.
If you're following my guides, it would seem reasonable to assume that you're interested in digital video. From this point of view, it would not be a giant leap to assume that you'd automatically choose this VCD format over the now outdated VHS format. But there is of course the alternative of creating a DVD from your source material. After all, you're going to want to maximise quality. The main advantage of creating Video CDs is their relative cost: most PCs come with a CD-R as standard, and CD-R media is can be picked up much less than the cost of VHS tapes. Given that the majority of players support the VCD format, creating a Video CD is currently the most viable option for distributing an amateur film.
The format uses the mpeg1 codec for encoding. Unfortunately, it's not simply a matter of encoding to mpeg and then burning this to disc. The VCD standard is exactly that: a standard. Your mpeg video must meet certain specifications in order to be recognised by DVD players.
PAL video: 1150 kbit/sec MPEG-1 352 x 288 pixels 25 frames/second
Most encoders (I always recommend tmpgenc) have templates which will automatically encode your video according to the above specifications. But this isn't the last standard which must be observed. The way in which you burn the VCD will also determine whether is is playable in a standalone DVD player.
Again, your burning software will provide templates which will automatically create the standard VCD structure - all you have to do is provide the mpeg encoded video.
The VCD standard also lends itself well to converted analogue footage. My experience of analogue to digital conversion is that the frame size is often restricted to around 340 x 240. So creating a VCD seems a logical step.