First off you seem to not know what compress means. It means to make it smaller. Furthermore there are 2 types. Lossy - information is thrown away (best compression). Lossless - information is compressed but nothing is thrown away (least compression). Provided the video is most likely in mpg it would be better compressed with little loss to avi. Google iriverter. Install it and then find the profiles folder, create a new one for your file type and then set other settings then using the original file compress at different bit rates and see which is best.
For the size you are looking at it would likely be about 2mb a minute aka a file of about 3mb should be doable however you dont give us anything more than how long the file is so I cant help any more than giving a vague answer.