You cannot "embed" a video in a Powerpoint presentation. It is automatically "linked" instead, AND it will only use a direct address to the video (not relative).
Therefore, you must send the video and presentation to the person PLUS they must place the video in the exact same path you had it originally. If they try to play it in powerpoint as a PPT, it will ask them to find the video if it is not, but if they just play it as a PPS or as a "Show", the video will just not play.
As for playing "in" or "outside" a presentation file, it depends on the setup of the computer. If you embed a file that powerpoint recognizes, and your computer has a OLE object that matches the one in the playback information in your file, then it should play IN the presentation. If the person you send the file to does not have the same OLE module required to play back the video, then it will attempt to play the file in an external viewer.
As a note, PPT was never designed for "distributable multimedia" ... it was designed for giving presentations, usually from the same computer it was designed for, or at least to be tweaked on a new system before showing it ... it is not the type of device you can use for CDs etc, especially when video and audio is in question.