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This is the Audio Device Graph Isolation service, a part of Vista and 7's audio services. The real audiodg.exe is harmless, but like any file it could be infected. If it's not doing anything, it should be fine. The worst that can happen by ending it is your audio goes out, restarting your computer would fix that.
Windows Media Codecs. The Windows Media Audio and Video codecs are a collection of objects that you can use to compress and decompress digital media data. Each codec consists of two objects, an encoder and a decoder. This part of the documentation describes how to use the features of the Windows Media Audio and Video codecs to produce and consume compressed data streams.