When you enable the auto-convert video checkbox in the Setup step of the Campaign Builder under advanced options, we'll scan your content for embedded video and convert what we find to an email-friendly screenshot that's linked to the URL of the video. This is particularly useful in RSS-to-Email campaigns if you post videos to your blog or if you're bringing in content from another source, such as importing from a URL.
Why would I want to convert my videos?
Most email clients strip out embedded video in email content because they can't play the videos within the email program. The best solution is to include a screenshot linked to the video URL, so we provide video merge tags to help you do that quickly for a variety of video hosting sites. Sometimes, though, it's difficult to add those merge tags to your content, such as when you're posting a video to a blog and then using the RSS feed for that blog to create a campaign in MailChimp. The auto-convert video option works in the background to find embedded videos in your content and convert them to the same screenshots you'd get if you used the video merge tags in your content.
You can find out more about video merge tags here.