What is the best software for desktop recording?
How do I create screencasts on Windows?
Is there a specific tool or program that I need?
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There are a number of programs available to help you create a screencast. As nhinkle mentioned, part of the answer depends on if you're going to do a "live" screencast or if you're going to record this and post a video somewhere for later viewing. I have no experience with the former, so I'll speak to the latter.
There are a number of programs out there for screencasting - some free, some not; all with their own pros and cons. Wikipedia has a more extensive article with a more comprehensive list, so I'll just mention the programs I've worked with.
The first program I've used was the aforementioned Debugmode Wink. Its free (which is great when you're on a small budget...) and is relatively simple to use. Basically it takes key frames and then renders the final video. You can edit each of the key frames and move the mouse, annotate, and/or add audio.
On the plus side, because you can manipulate the mouse movement independently of everything else, and because it works via key frames and not straight recording, the resulting video is a lot smoother and the mouse movement looks clean and professional.
On the downside, it takes a little getting used to when to capture a key frame (assuming you're not using the timed capture) and the audio is of low quality.
The resulting video is good, and I've had a lot of great results using it for creating training demos sans audio. As long as you don't need to capture any video, and you don't need high-quality audio, its a great program.
The second program I've used is CamStudio (not to be confused with Camtasia). Another free program more along the lines of Adobe Captivate. You can get some great video and audio with decent file sizes using it. However, it takes some tweaking to find the right compression/audio/video capture settings that work for you.
Sadly the project has been abandoned, picked up, and abandoned again. The last update was in 2008 where a beta of 2.5 was floating around the blog, and source for a 2.6 beta is on sourceforge. I've used the 2.5 beta without any problems of note.
I haven't used it as extensively as I have Wink, but that's more a function of time than anything else.
Lastly, when our Marketing department switched to Macs, I got their Windows copy of Adobe Captivate. :)
I've seen what they've done with it, and it is amazing. Sadly, I haven't had the time to work with it myself, but I figured I'd mention it anyway.
Hope that helps.
If your users are all on Windows, Microsoft SharedView works really well. You set up a session, choose which windows to share (you can share the entire screen or just specific applications), and then you can invite people by sending them the authentication info. Viewers can even remotely control your computer if you let them. It does require installing the sharedview application on both your computer and the clients' computers. One further advantage is that all the data is transmitted over HTTP, so you don't need to worry about forwarding ports and such.
If people aren't watching something live, Debugmode Wink is a good program for taking screencasts, customizing them, then saving to swf. Jing is also a very good tool. It doesn't offer the same customization options, but it does automatically upload your screencasts if you want it to, making them easily visible online. In this case, storage is included, which deals with your first question. It's free, but limited to 2GB (iirc) if you don't upgrade.
Can you further specify what you need to take screencasts for and how they need to be viewed/distributed?