Quality 1 is best
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You can make watermark-free, high quality animated gifs online for free.
Some of the popular supported video formats are flv, avi, mov, mp4, mpg, mpeg, wmv, 3gp, asf, swf, ogg, h264, rm. But there are hundreds more...
Large videos can take much longer to download and convert to GIFs, and they are rough on the server. Since you're probably only using a few seconds of the video, try to find a shorter version or use a tool to chop up the video.
Make sure the video resolution is 480P or higher. This is the youtube format imgflip uses most, and gifs will generally look great up to a width of 640. Framerate (FPS) is also very important - your gif will be slow and choppy if the FPS is low.
Most of the time, this is caused by an old or weird video format. Some video formats don't allow image frames to be extracted as accurately. The best way to fix this is to find a better video source. On youtube, videos with high quality options will give better results.
This can happen if you selected a small portion of the video such that only one frame was used. It can also happen if you're using internet explorer: the gif itself works fine, the browser just doesn't play it.