VirtualDub started as a software for recording video from analogue sources. This means it's roots are in the beginning of video processing on PCs when videos usually had the size of stamps. This causes a single drawback of Virtualdub: it is using very old APIs and formats, i.e. VideoForWindows and AVI.
When Phaeron developed VirtualDub, Windows video software was unstable crap (well, it still is). But Video editing heavily depends on 3rd-party software, mostly codecs and filters. So he created very stable code around potentially dangerous software to catch any misbehaviour.
Today VirtualDub still is a great tool and it's one of the most robust video editors out there.
When a few plugins/codecs are installed, it is able to open almost any file and write AVI using almost any modern codec. It will have a few quirks with HD files though...
Phaeron stopped development, but he promises to keep it working on future versions of Windows.