This is a freeware solution, but see the notes below.
ffmpegX a DVD, SVCD, VCD, CVD, VOB, DivX, XviD, H.264, PSP, MP4, MOV encoder for Mac OSX
And see this tutorial, useful for more than the title implies.
UPDATE: Since many people are hitting this post, and someone has commented that it doesn't work, I'll add links to my other posts (other methods) for creating iPod video. The most reliable way is to use Quicktime 7 Pro but as commenter Ryan has noted, it is slow. And it costs $29.95 - but it's worth it in my opinion.
UPDATE 2006:
I've just read that the new version of iTunes (6.0.2) has a dropdown to menu option to convert a video already in iTunes to iPod format:
Posted by Dave at October 18, 2005 03:19 PM
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