It looks like dreams can come true: Despite what many people thought, Apple has approved VLC for the iPad. The swiss army knife of video players has a plethora of codec support, so you no longer have to convert all your movies to .mp4. The player is free and open source, so there is absolutely no reason not to download it. It’s propagating across the App Store servers, so if it is not available in your area yet, just hang tight.
VLC media player is available on the AppStore! http://applidium.com/en/news/vlc_on_the_appstore
VLC is a free and open source cross-platform multimedia player and framework, that plays most multimedias files and various streaming protocols.
It is simple to use, yet very powerful and extendable.
VLC has all codecs built-in. It comes with support for nearly all codec there is. And what is more it can even play back the file or media if it is damaged! Missing or broken pieces are no stop to VLC, it plays all the video and audio information that’s still intact.
Note: Non-natively supported files can be added using the iTunes File Sharing feature. Thanks ChrisL!