That sounds like dvd-video. DVD-video always consists of a Video_TS folder which contains .vob, .ifo and .bup files. If that is what you have, you don't have to convert it to avi unless you just want to. DVD-video can be burned to dvds and played on any stand alone player. The only question is whether the dvd-video is small enough to fit onto a single layer blank dvd. If it isn't, you can use a free tool like DVDShrink to reduce the size to fit that target disk.
If you still want to convert to avi, there are any number of free tools that can give good quality results. Look at AutoGK, FairUseWizard, or even AviDemux to convert dvd-video over to an avi using the xvid video codec.