Tina, you need to install video codecs on your PC so that the software can decode and then re-encode the video.
I suggest you install the K-Lite Mega Codec Pack as it contains all the files you need to convert different file types. You can download it
HERE Once installed you should have no problem converting the files. Not sure what version of AMV Converter you downloaded but version 3.68n is a bit more stable than version 4.0.
DVD's are better converted to AVI format before converting to AMV format you can find other software in the Download>Tools section for doing this and if you look in the Video related forum you will find a few posts on different methods of conversion that others have used to get the best results.
Hope this helps