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Video Format and Software

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I have various movie DVD's.
I want to convert them to a digital format.
I am planning to see it using a PlayStation 3 or a MediaCenter, ...

I would like a format that would take less space then a DVD but
preserving good image and sound quality and common so I don't have
problems in reading it later.
Of course I would like to preserve the video features like subtitles
and so on ...

What format should I use? Divx, AAC, ...? Any other?

What conversion software should I use? I would like a good one ...
Does not need to be free.

Thank You,
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