MKV files are the preferred choice for high definition videos converted into a digital multimedia format. The MKV file is an audio/video carrier and contained within in it you will find all the components that make up a movie. You could for example find multiple language tracks, cover art, movie menus, descriptions and of course the video stream. Also known as Matroska consider an MKV file like an envelope, in it you place all the things you need to carry a movie converted into a digital format.
Because it is an open standards project Matroska is completly FREE to download, don’t ever allow anyone to charge you for using it. So to summarize, an .MKV file or a Matroska file is not a movie compression tool, it is a carrier which takes, stores and delivers all the parts you wish to transfer from a movie.
The video stream contained within an MKV file is usually a H264 (MPEG-4), AVC, DigitalRealVideo or XviD file and as for the audio source it is more commonly transported within the MKV file as an MP3, AV-3 or Vorbis stream. Still following? Good, now when the MKV file arrives at its destination everything needs unpacking and decoding, this is done by the use codecs. Codecs are compressors/decompressors, some people will have a set of codecs downloaded to their PC although by far the simplest way to play back a MKV file is by the use of an integrated video player.
My personal choice because it is simple, it works and it is free is the Media Player Classic, another good one worth a consideration is the VLC Player, both work very well.