Often the need to resize movie images' size emerges. Its reasons can be many: decreasing file size, network bandwidth,etc. Most people even do rescaling when converting DVDs or SVCDs to DivX AVI. If you wish to rescale, read the Preserving aspect ratio section.
The scaling process is handled by the scale video filter: -vf scale=width:height. Its quality can be set with the -sws option. If it's not specified, MEncoder will use 2: bicubic.
mencoder input.mpg -ovc lavc -lavcopts vcodec=mpeg4 -vf scale=640:480 -o output.avi