Download VirtualDub and open it

File>Open Video File and select your avi file

Find a part of the movie you want to make into a gif

Press the arrow pointing left at the part where you want your gif to start and the arrow pointing right for where you want the gif to end

File>Save segmented avi

Now open Photoshop and click Window and make sure that Animation is selected

File>Import>Video Frames to Layers and open your file

Select Selected Range Only and Limit To Every…

Set that to 2 or higher

I go between 2 and 4 

Also select Make Frame Animation

Now Image>Image Size and make the width 500 or less 

Click the arrow pointing down on the animation box, click Select All Frames and then right click on the numbers on one of the frames and select 00.8 seconds (you can choose something else if you want)

Press play and if you’re happy with it then go to File>Save For Web & Devices

You have to make sure your gif is under 1000K (you can see the gif size just under your file in this window) so play around with the Colours here. Also look for a box that might say Noise or Diffuision and change it to Pattern, this will reduce the file size to allow more colours. Or click the little arrow on the top right and click ‘Optimize to file size’ and change the desired file size to 1000.

Press play to check you’re happy with it and then click Save. Make sure you select Images Only when you save it.

And now you’re done. Ready to upload to Tumblr!