FSRecorder , FRAPS, and Windows Movie Maker is the way I use.
And the best part is that all three are free!

Use FSRecorder to record your flight, so you can concentrate on the flying.

Next use recorder to play back the flight and use FRAPS to record this. FRAPS demo is free, but only records 30second clips.
When you have that done. Import all of the FRAPS files into Windows Movie Maker and arrange and edit and add effects and music if you wish, and then save it to the format that you wish. usually wmv.
This is the basic outline of how I do it. It's somewhat more involved than this, making just a basic video can take me up to 3 or 4 hours, but the end results are rather nice.
Here are a few I've made using this process:
(all music by me

)
http://www.simteevee.com/watch.php?mdid ... vy+Liftinghttp://www.simteevee.com/watch.php?mdid ... NL2000+v.3http://www.simteevee.com/watch.php?mdid ... ey+RunningALSO!!