It all depends on what you're trying to accomplish and how much storage space you are willing to use.
A DVD ISO will preserve all available quality and the menus and extra features (if you rip them properly, at least), but you're looking at about 4.5-9GB of space for a single (presumably) standard-def movie.
If you rip the same DVD to an AVC (h.264) .mkv file, you lose just a little bit of quality but you can get away with a file size that fills a CD (~715MB) or maybe two (~1450MB) instead of the 4.5-9GB of a full .iso.
As for HD content: ripping a full-length Blu-Ray movie to your hard drive in an .iso can take up anywhere from 25-50GB! While this will obviously preserve the excellent quality you get with Blu-Ray, the standard file size for a movie compressed to an AVC .mkv file is 4.5-7GB for 720p and 7-14GB for 1080p (depending on movie length and bitrate preferences).
This means that with a terabyte-sized drive, you can fit about 15-30 BluRay .iso images or about 90 1080p .mkv files or about 175-180 720p .mkv files.
The choice is yours. As I said: it all depends on your needs and your total storage space versus your total number of movies you'll want to store. If you have the space, by all means, go with the .iso format. If you're after storage efficiency, go with converting to .mkv.
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