It is based on MotiVE, a vector quantization codec which Microsoft licensed from Media Vision.
In 1993, Media Vision marketed the Pro Movie Spectrum, an ISA board that captured video in both raw and MSV1 formats (the MSV1 processing was done in hardware on the board).
Interpreted as vector quantization, vectors with components red, green, and blue are quantized using a forward adaptive codebook with two entries.
The NetShow encoder allowed the user to select a 2 pass option, where in the first pass the video was analyzed to create a color palette, and in the second pass converted to the palettized color space and encoded.
Later versions of Windows Media Encoder dropped support for Microsoft Video 1 and only supported Windows Media Video.