I've been shopping around for a DVR and noticed that some record in m-jpeg format and others record in mpeg4 format. Which is better? I've tried researching it but the more I read the more confused I become.

Base it on your budget. If they both cost the same then go for MPEG.

If you plan on recording video from a DVR to a remote computer then you have to decide which is better for you.

MPEG4 uses a lot less disk space per hour than M-JPEG.

It depends.

MPEG-4 generally uses less disk space at higher frame rates. At lower frame rates you can lose the space advantage. It also tends to have a higher processor cost, but this is becoming much more of a moot point.

MJPEG tends to be generate larger files. It does use less processor which can be nice. It's one big advantage is that it's extremely portable. MJPEG codecs tend to be very very easy to mix and match without issue, and almost all of them will play in Windows/Mac/Linux without a special codec. This can be fairly important if your trying to give the video to the police.

MJPEG is just a collection of JPEG images combined into a single file.

This means that frame captures look good (jpegs were designed for static images), but compression suffers as it cannot compress across frames.

MJPEG does compress across frames, but is meant to be viewed in motion, so stills don't look quite so crisp.

Settings can sometimes be tweaked so it's not quite so black and white as this, but that's the general theory.

"MJPEG is an outdated and inefficient codec, whose main advantages are low processor overhead, ease of editing, ease of implementation by developers using existing JPEG algorithms or libraries, and broad compatibility."
http://en.wikipedia.org/wiki/Mjpeg

Duncan