It is a function that encodes or decodes video data into various formats. Usually this is done by a specialized chip on hardware or a dedicated function of the CPU. The purpose is to compress the data into a manageable stream. Raw video data is gigantic. H.264 is an example of a codec commonly used all over. MJPEG is another.
Codec differes from format or container. The container is the file specification for which the data is contained. Avi or mp4 or mov are examples of file extensions for various containers. Containers have a set of codecs they support for a variety of reasons.
To muddy the waters even more there is also another layer when streaming the actual data. RDP is an example protocol for converting the data into TCP or UDP packets so they can traverse the internet.
Video transport and storage is an infinitely complex and fun topic with a lot of history. All of this is because video data is so dang huge and so prolific. Saving on data storage and transport costs can save a lot.