We seek to demonstrate how digital video technology can contribute towards our understanding of the process of development of conceptual understanding in physics. We use digital video to analyze 4 brief Physics by Inquiry sessions with 2 groups of preservice teachers. The instances include independent group work and instructor-student interactions. Important insights emerge on the way students attempt to make sense of their observations and the way their initial ideas hamper the process of inquiry. Specific difficulties are identified that influence the learning trajectory. These are classified into categories, including epistemological, conceptual, and reasoning difficulties. Additional results demonstrate the crucial nature of careful guidance in inquiry-oriented activities and the variety in student responses to epistemological and other obstacles.