There are dozens, maybe even close to 100 video codecs. Many official, many hacked, many obscure.
VLC is a single mission to support all codecs in existance if possible.
MS supports most of the mainstream ones but not necessarily things like xvid for example.
It's only been with the advent of Windows 7 that you've been able to play standard mp4 files out of the box at all! So it's an improvement.
Sharkey would know best about his own codec pack, but I'll second that that codec pack has worked very well for me on my machine playing the uh... various and sundry underground codec and container combinations found around the net.
[Edit] Though MS pays licenses for h264 and aac and others, they may not be able to include a lot of open source codecs at all... ever. VLC being an open source project can include all open source codecs and well also potentially illegally licensed ones by placing the blame on you for using them... Linux also does not come with all codecs installed due to opposing licensing restrictions as well, forcing you to "take the blame" for installing and using them. [/edit]