AVI is the veteran of desktop video: dependable in 1995, cranky about everything invented since. It was born in 1992, Microsoft, and its real weak spot is modern life: no proper streaming, no subtitles, no love for modern codecs.
AAC is MP3's better-trained successor: cleaner sound from the same number of bits. Advanced Audio Coding: the default soundtrack of YouTube, iTunes and most MP4 video. That makes it the right destination when what you need is streaming-grade sound at friendly file sizes.