At its heart, Wii Transfer is about making it easier to move movies, music, and pictures to your Wii.
There are two ways to watch movies:
In both cases, Wii Transfer converts the QuickTime movie file to the appropriate format. Movies on SD cards are played in the Wii's Photo Channel, which generally is not suitable for long movies. Streaming a movie plays it directly from your Mac over the local network, in the same way that sharing music and pictures works.
The Preferences window in Wii Transfer has independent quality settings for both types of movie files. You can also adjust the cache size for streaming movies, or manually delete movies from the cache by pressing the delete key while a movie is selected in the Movies pane.