Man, some of you really have no idea what your talking about.
First, lossy codec's, well HuffyUV comes to mind, it's one I use, it's public domain. See above for many more examples.
Second, The reason that you people complain that a DivX does not look as good as the DVD is purely bitrate. The MPEG2 stream on a DVD is usually in the 4-8Mbit/sec range. Single CD DivX rips are generally 600-850KBit/sec SBC. If you use a mich higher bitrate for DivX, it is 100% visually the same image, you cannot tell them apart. Try it yourself, use a 6000KBit/sec bitrate with DivX and you will not be able to tell them apart. Thus, if the studio's compressed their masters to both MPEG2 and DivX at the same bitrates, they would be for all intensive purposes the exact same image. Each codec has it's strong points, MPEG4 deals with some scenes better than others, as does MPEG2.
Second, for whoever said that you can't get 5.1 audio in DivX, you are completely wrong. In fact I have many movies that contain the original AC3 audio track from the DVD.
In conclusion, DivX CAN be as good, maybe better than, MPEG2. The reason people don't believe this is because they are always downloading very low bitrate DivX's. Compress a DVD to 6000KBit/sec DivX, add the AC3 audio track and you will have a nearly identical rip. It's not 100%, see below, but the chances of you noticing the extremely small differences (at this bitrate) are very very low. However your rip will also be around 4GB, same as the original.
DivX/MPEG4 is a lossy format, same with MPEG2. MPEG4 just scales to lower bitrates alot better than MPEG2 does.