Apple has added "iTunes in the Cloud" as an aditional features to iCloud service, which allows users to download movies and TV shows purchased from iTunes, or "digital copies" downloaded from iTunes to iCloud. However, movies in AVI format are not on the list. And it's evident that iCloud will not support AVI format now and later as Apple is affectionate to MP4 but AVI.
So, can we transfer the AVI movies to iCloud through converting it to MP4 file format? The answer is NO. We can't transfer the converted files to iCloud. At least so far, iCloud doesn't support storing your converted movies or DVD ripped for iCloud; See how Apple talks about iTunes in the Cloud.
With iCloud, you can have iTunes automatically download new music purchases to all your devices the moment you tap Buy. You can also access past music, movie, and TV show purchases from any of your devices — wirelessly and without syncing.
If you like watching AVI movies on Apple devices then you should convert the AVI file format to MP4 and then using AirPlay to stream the converted MP4 file to iTunes, iPad, iPod, iPhone or Apple TV, or transfer the converted MP4 file to iTunes and sync it to your devices. A tool called iPad video converter should help you. This is a program that converts movies and music to Apple format like .mp4, .mov.
With iPad Video Converter, all you need to do is load AVI movies to the program, set the output format to MP4 and click the "convert" button to start converting AVI movies.
Convert DVD movies to iPad video and audio easily. The default presets are the optimized settings for iPad with best video quality and sound effect.