M-JPEG stands for Motion JPEG. M-JPEG is a video format that uses JPEG picture compression in each frame of the video. Frames of the video don't interact with each other in any way (like they do in MPEG-1, MPEG-2, etc..) which results in much bigger filesize, but in other hand, it makes the video editing easier because each of the frames has all of the information they need stored in them.
M-JPEG is used in very high quality video captures -- normally as the raw data format which is edited and compressed into another format after the editing process is completed. Unfortunaly M-JPEG is not a standard or even standardized -- each vendor has their own codecs and normally M-JPEG files created with one codec cannot be read with other vendor's codecs.
M-JPEG is the format that we recommend you to use in your video capture process as a raw data format. Editing this videostream is extremely easy and encoding the edited M-JPEG stream into final format (such as MPEG-1, MPEG-2 or Divx ;-)) gives normally the best possible video quality.