It really was the only way to get a balance of decent video quality with a reasonable (usually 700MB or less, for CD-video purposes) file size.
My computer was too weak to really play back said DivX files at the time (‘02? ‘03?) - so I would burn them and play them through my Dreamcast with a TV tuner card attached to my computer tower. (I didn’t have a TV of my own, but I had a computer monitor!)
The only other alternatives I knew of at the time were QuickTime (which got big fast when it was longer) and AVI, which; AFAIK, didn’t even use compression and was thusly huge.
It’s not a wonder that DivX is gone now; but for a while, it was just insanely prevelant.