yes, you can render out as an .avi, but its a terrible idea. Usually, its better reccommended to render out as individual frames and string them together, for at least a couple of reasons;
1) the .avi will be huge. The initial file will not be compressed whatsoever. This can make it hard for some systems to deal with.
2) If something happens to your machine that interrupts the render process, your file will be junk. Unless an .avi is completely rendered out, it won't work. With a long-rendering file this becomes a huge issue. With frames, if the render gets interrupted, you will only have one frame to redo, for a fraction of the time taken.
my personal reccomendation is to go with stills. What format you use is a bit of a personal preference, after weighing technical needs, but in most cases I use .jpeg or .png (although I've seen targa and tiff mentioned around here).