Codec stands for compressor/decompressor. It's basically a way of compressing video data--it's what makes videos a certain file size and/or visual quality. Like, have you ever seen a video that was all blocky? That's because the codec used for it wasn't very good. It sacrificed too much visual quality for file size. So, it impacts file size, but it doesn't merge files together. That's the job of programs like VirtualDub.
I don't have access to WMM. My understanding is that it's acceptable for super basic editing, but your end video doesn't turn out very clear because of the way it encodes things*. VirtualDub may look intimidating, but it's really not. I highly recommend that you learn how to work with it for good quality videos.
*This is just from word-of-mouth, again, and not my personal experience. YMMV.