I'm not sure if that is the case, but from what you wrote, I suspect that the ISO was a perfect DVD quality, because it was in fact an ISO of a DVD(r)

They are quite popular and I, for one, prefere them over the usual rared (or even not) VOBs and whathaveyou's.
Other possibility is that it was an ISO of an SVCD, in that case the quality would be like a regular XviD/DivX - meaning a poor rip/cap/whatever gives out a poor XviD/SVCD and a good one the opposite. The only difference is that, of course, the avi will be much smaller that an SVCD.
Here:
http://forum.dead-donkey.com/viewtopic.php?t=4 is a guide to different formats, which covers all in sufficient detail (and here
http://forum.dead-donkey.com/viewtopic.php?t=522 is one only about formats). Just scroll down to "What does ??? in the filename/release thread mean?".