VLC's UI sucks so terribly, it's like they went WAY out of their way to make it sucks on purpose, and stubbornly refuse to acknowledge that there are any problems or ever consider fixing them.
One example of many [1]:
Type CMD-E (on Mac, or whatever the equivalent is on Windows) to get the video effects window.
Select "Geometry". Now check "Magnification/Zoom".
Notice how you get a picture-in-picture in the upper left corner, with a white rectangle showing the zoomed area, that you can move around by clicking. But if you press and hold, it also drags the entire windows (on a Mac -- I haven't tried on Windows -- VLC's UI and behavior on Mac and Windows diverges widely so I won't try to predict what happens).
Now look underneath the picture-in-picture and notices some ugly upper case pixelated text that says "VLC ZOOM HIDE". See how it's jaggy and rendered at the resolution of the movie you're playing itself, not at screen in a full resolution overlay with readable text?
Now look at the triangle with a jaggy curved hypotenuse below the jaggy words. That is the zoom "slider" (which also drags the window when you drag the mouse, so it's more like a clicker than a slider). See how it gets narrower and narrower in a succession of jaggy stair-step chunks, until it's merely one jaggy pixel wide? Well guess what: the TARGET AREA also gets narrow to match the width of the slider, so it's almost impossible to click on the bottom of the slider, to select the larger zoom sizes! Since the zoom slider is not very tall and its pixels fat and jaggy, you don't have fine grained access to very many zoom sizes at all, either. The zoom pixel steps are much bigger than screen pixels, depending on the video resolution!
What possible purpose could that serve? Why would any user guess that the lower narrow part of the slider represents a wider zoom showing a bigger rectangle over the picture-in-picture, while the top wider part of the slider represents a tighter zoom showing a smaller rectangle over the picture-in-picture? And what slider have you ever used that gets narrower from top to bottom, with a jaggy curve, and an impossibly narrow hard to click target area at the bottom?
This single facet of VLC's terrible UI deserves to be front and center in the User Interface Hall of Shame [2] -- it's even worse than Apple's infamous schizophrenically skeuomorphic QuickTime 4.0 player [3], from 1999! The latest version of VLC in 2017 is still much worse than the shameful QuickTime player was 18 years ago!
Who could have possibly gone so far out of their way to design and implement such a terrible user interface on purpose, then smugly brushed off and ignored 16 years of bug reports and cries for help on the VLC message boards, without harboring a malicious contempt for their users?
That's not even the worst of it. Now check "Transform" and pick one of the transforms like "Rotate by 90 degrees". Guess what? The magnification interface itself is rotated 90 degrees, because it's drawn on the video before it's rotated, so now it appears at the top right of the screen, rotated 90 degrees itself.
And guess what else? The mouse clicks are not even transformed properly, so clicking on the magnification interfaces does NOTHING, rendering it completely useless! Depending on the aspect ratio of the video, you can't even click in the upper left corner where it USED to be and SHOULD still be to operate it, because it is clipped off the right edge of the window.
Are those ugly cosmetic and impossible usability problems not bad enough for you? Then make a playlist with one item. Select "Repeat" mode. Play the movie. Now go to the finder and remove, rename or move the movie you're playing, or just unplug the USB stick containing the video. Not an uncommon occurrence, right? Now VLC will hang up, consuming 100% of the CPU time, often times seizing up the entire Mac, turning on the fan, locking out all user input, and forcing you to reboot! This happens to me all the time.
These bugs have been around for years. The more you fiddle around with it, testing out the edge cases and trying to combine various poorly designed and implemented features, the more bugs you find.
File a bug report, they say. People report these problems again and again. The developers just ignore them and brush them off. I've tried reporting these and other bugs, describing them in meticulous detail, which is frustrating because once I start writing step-by-step instructions to reproduce one problem, I keep finding more and more problems, each worse than the last, and then they just brush me off and ignore my bug reports too.
VLC's user interface is maliciously terrible in so many ways, the developers are careless and arrogant towards their users, and there's no hope of the developers ever changing their ways, acknowledging the problems, and improving it. Instead of improving usability for everyone, they're more interested in adding yet another obscure anime decoder feature so they can watch their AMV cartoon porn [4] [5].
[1] http://imgur.com/gallery/g0acV
[2] http://hallofshame.gp.co.at/index.php
[3] http://hallofshame.gp.co.at/qtime.htm
[4] https://www.videolan.org/vlc/releases/2.1.5.html
FOR ANIME FANS
New 6.1 downmixer to 5.1 and Stereo from MKV/Flac 6.1.
Correct YUV->RGB color matrix in the OpenGL shaders.
Improved MKV support for seeking, and resiliancy.
Editions support in MKV.
Better subtitles and metadata support from MKV.
Various ASS subtitles improvements.
[5] https://myanimelist.net/forum/?topicid=208770
Now, if you are an AMV (Anime Music Video) creator and want to edit the video directly, the MKV is your best friend since it's a lossless video-content container due to the fact that you will find yourself adding effects to the video frames/audio. In this case you will want to lose as little as possible in your video, so MKV compression best suits.
TOPIC ANSWER: The reason why MKV is popular for anime is because of it's noted lossless compression. Anime show creators most likely notice this fact and use it to contain their video frames and audio tracks for maximum quality. - it has nothing to do with HD.