WoWVid

WoWVid (WoW Video) allows the user to watch movies inside WoW while doing dailies or grinding.
(originally by Norpse)

How does it work

WoWVid creates a texture that when properly configured, allows media playing in the background to project inside WoW.
It is a pure lua addon, no executables.
You will however need an external player of your choice that is capable of playing video in Overlay mode.
Most popular media players (and several freeware ones) support this mode of operation.

Setup

Start World of Warcraft.
Once in the game press Esc to bring up the Game Menu.
Select Video -> Graphics -> Display Settings -> "Windowed(FullScreen)"

Example configurations for 2 popular media players: (thanks to Garual for the write-up)

VideoLAN Player

start VLC
click Tools
Preferences
go under Video
make sure Accelerated video output is on
for Output select DirectX(DirectDraw)
start playback
start WoW
type /wv config and set WoWVid to R:0 G:0 B:1
place WoWVid window over the VLC one.

The KMPlayer

start KMPlayer
press F2
click on Video Processing
select tab Renderer
for Renderer choose Overlay mixer
start playback
start WoW
set WoWVid to R:15 G:0 B:15
place WoWVid window over the KMPlayer one

Addon Configuration

/wowvid or /wv from command line or use the minimap button.