Hi, by default you can only add M4V, MP4 and MOV files. Simply drag and drop them into your library. If you have videos in other file formats (like AVI or MKV) you have two solutions: convert them with a tool like HandBrake. That takes a lot of work and time. Or you use a dedicated tool to import movies in iTunes. I use VideoDrive (www.aroona.net) for this. It will create small references to your videos in iTunes. And it will also add descriptions and covers so they look as nice as officially purchased movies. Keep in mind that if you do not convert the videos, they will not play on iOS devices. VideoDrive (and some others) to support conversions as well. So you always have the choice.
In my case, I add the videos without conversions so they are nicely categorized in iTunes. And the videos I do want to watch on my iPad, I convert later on. You can do this by selecting a video in iTunes and clicking File -> Create new version. Or use the 'Duplicate Video' feature of VideoDrive. I can imagine that this is overkill if you only have a couple of videos, but if you have a lot, it's great to have them all showing up with artwork in iTunes.