To create a video recording of gameplay, you need to first capture it using a tool like Fraps (http://www.fraps.com).
The resulting .avi videos are usually too large to send to anyone or post at YouTube or Vimeo, so you need to compress them.
We convert the Fraps videos into wmv (Windows Media Video) format using Windows Media Encoder (http://www.microsoft.com/windows/windowsmedia/nl/9series/encoder/default.aspx).
But you may need to edit the film first. You may want to take out unwanted parts, and add overlay text explaining what is happening. And add a title in the beginning, and the credits at the back. There are several video editing packages you can use.
After an extensive search, we landed on Sony Vegas (http://www.sonycreativesoftware.com/moviestudiope)for editing HD quality films.
It is not expensive yet highly functional. We used to use Adobe Premiere, but that tool is way more expensive and not suitable for modern HD quality films from the newest generation of HD Camcorders, which use the AVCHD video format. That argument is not so important for Fraps-captured game videos. But we often mix camcorder shots with screen captures.
Windows Movie Maker is a free tool that ships with Windows, but cannot export HD formats (at least I didn't find out how). If your target is YouTube, Movie Maker may be just enough, as YouTube does not support high-resolution video anyway. But we use Vimeo (http://www.vimeo.com) for its high resolution video option: 1280x720. So we capture the scenes also in that resolution.
If you want to capture the Mission Editor, you need to set the resolution higher, like 1440x900, because the Mission Editor needs more vertical resolution to allow you to click on the OK button at the bottom. So in such cases you need to capture at a higher resolution and export the video into a lower resolution, 1280x720 for Vimeo.
To export the resulting edited videos, I use the following settings:
Video Format: wmv version 9
Video Bitrate: 5 Mbps
Audio format: wma version 9.1
Audio Bitrate: 128 kbps
Resolution: 1280x720 for Vimeo
Frames per second: 25
