AVI is a container, that can hold many different video and audio formats. And few formats are supported out of the box on Windows XP.
To enable playback of extra formats in Windows Media Player, you need to add codecs. "ffdshow" should enable most video and audio formats in avi files (and other files). Or you/she can use VLC, it's a video player that includes it's own support for most formats.
With Windows Media Player in Windows 7, I think you should be able to play most video and audio formats stored in most containers, except for mkv. Your best choices are probably a mp4 file with MPEG4 video (h.264 being the top MPEG4 video) video and AAC audio, or an avi file with Xvid/DivX video and mp3 audio.
Also, .wmv (Windows Media Video) or wmv/wma in avi is an obvious choice. But .mp4/h.264/aac is more standard and is probably easier/cheaper to produce on a Mac (.mp4 is derived from Quicktime, and Apple loves h.264 and AAC).
And avi/Xvid/Divx/mp3 isn't standard, but it's crazy popular on the Internet.