Windows 7 comes bundled with decoders for several video formats, including H.264 and Xvid. These decoders from Microsoft are used by default by most DirectShow application, including Windows Media Player and Media Center.
If you prefer using ffdshow or some other third party decoder, then you can use the Win7DSFilterTweaker tool to adjust the preferred decoder settings in Windows 7.
Sometimes it is also needed to disable the Microsoft audio and video decoders.
The Microsoft players use the new Media Foundation playback framework for playing certain file types, such as AVI, MP4, M4V, MOV, M2TS, and WMV. To force the use of DirectShow filters such as ffdshow, you need to disable Media Foundation with Win7DSFilterTweaker.