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it's not clear your boss knows what he's talking about. but if he does, he's asking for a video (flv) to demo your website. (i'm not sure if he's thinking you'll stand in front of a monitor with a camera and video your website in action or he thinks you can create a virtual demo. in either case, he'll need to hire a professional (eg, www.gdsquared.com) to get decent results.
he's also requesting, at least, two swf's to display that video. one would be, at least, 1024x768 and the other would be for mobiles (and therefore significantly) smaller (eg, 320x240).
Yes, he's going to use the same consultants who designed one of our websites to produce a virtual demo. I asked and he's sure they have the appropriate screen capture software, and will be expecting them to provide commentary and on-screen titles / subtitles / comments.
So it's down to the particulars of the video that will be created.
I've asked the same question over at the StackOverflow site, and the replies there do direct me towards YouTube as the ideal way of abstracting us from technical issues. A look at the YouTube wiki suggests a de-interlaced vid, with a maximum running time of 15 minutes (that won't be a problem, I'd expect 5 minutes would do the trick).
I didn't think a 320x240 video would retain enough detail to be able to display the use of our 'brochure' site (www,jameshay.co.uk), and the admin section which is linked from it - so I thought I'd be recommending something up at the 1024x768 (or higher) level... but perhaps it does...? I guess it depends on the editing - if the 'director' zooms in on the text at the appropriate moments, via the screen capture tool, then I guess it would be fine - but I suspect that's expecting a bit much!