mat_uk111: it would be helpful if you could indicate what distro you are using, and how you installed mplayer.
The vo option is your video output driver. Note that this is NOT the same thing as the driver for the video card. From a console, you can type 'mplayer -vo help' to see the full list.
Edit /etc/mplayer.conf to see if vo is set to a default. As someone posted earlier, try vo=x11 (that's what I use).
Also, mplayer requires some "RTFM"; see http://www.mplayerhq.hu.
Mplayer is a challenging package to install correctly from source; you would be better off installing it from your distro's packaging manager. For me, in Debian (with 'deb ftp://ftp.nerim.net/debian-marillat/
unstable main' in my /etc/apt/sources.list), all I have to do is 'apt-get install mplayer-k7 mencoder-k7 w32codecs', and everything is automagically installed and configured.