I've just downloaded the Zune software and shared a folder containing some .avi files on my computer. I've then connected my Xbox to my computer as the Zune software made it visible.
I'm able to view my computer and its content (just the silly demo video of horses). Why can't I see the .avi files on my Xbox?
I'm able to see and go into the folder from the Xbox but it's empty there.
Best Answer
This Link describes all the formats that the Xbox 360 supports for playback. Remember that AVI is just a container format and contains many codecs, some of which may not be compatible with the Xbox.
If you can't see the videos, you may need to "refresh" the folder to see if it is visible. Is there any particular reason you are using the zune software and not something more simple like Windows Media Player to share your video files? Try exploring other options to get your videos to stream.
This official article explains multiple different setup approaches.