When you Add Media Items you need to Select the Media Type. There are drop down options for the following types of media - Image, File, Sound, and Video.  Below is a list of the type of formats supported. 

Image: *.pcx, *.tga, *.jgp, *jpeg, *.bmp, *.png, *.cmp, *.pcd, *.gif, *.tif 

File: Supports any file type. Popular file types here are: *.pdf, *.doc, *.rtf, *.xls, etc.

Sound: Will support any format that you have Windows drivers installed for on your computer.

Video: Will support any format that you have Windows drivers installed for on your computer.