Because there were requests for a new explanation:

At first make sure you have the following two programs:
Fraps 2.8.6 or higher (commercial) and avidemux 2.5.1 or higher.
(the newest version supports fraps videos, so no virtualdub anymore)

Start Fraps and go to the “Movies”-Page.
Set the options to the same settings I have (except the Save Folder; the Vista Stream is only available under Vista of course). If you want you can increase the framerate to 25 or higher. I couldn’t see any difference between 20 and 25 (only in filesize).

Now after recording the ingame video start avidemux2_qt4.exe or avidemux2_gtk.exe (I like qt so I choose this one).

Open your recorded video with File->Open…

Settings for Normal version:

Note: If you want you can directly scroll down to the youtube version, the normal version is only useful if you don’t want to upload the video to youtube and small filesize

Set Video to “MPEG-4 AVC (x264)” and Audio to any codec you want. I use “MP3 (lame)”. The container format is also not important. I use avi.

Video->Configure:
Set the Encoding Mode to Average Bitrate 2-pass and 2000 kbit/s or higher. All other options are unimportant but you could try getting better results by changing them.

How to create the Youtube-Version:

Set Video to “MPEG-4 ASP (Xvid)” and Audio to any codec you want. I use “MP3 (lame)”. The container format is also not important. I use avi.

Video->Configure:
Set the Encoding Mode to Average Bitrate 2-pass and 2000 kbit/s or higher. If you don’t have access to a fast internet connection uploading will take hours so you should maybe select a lower bitrate.

Now open the Motion-Tab and set it to the same options as in the picture:

Video->Filters:
Not needed anymore in the version of the Guide!

More settings for both versions:

Audio->Configure: For mp3 use a bitrate of 128kbit or higher

It’s time to save the video: File->Save->Save Video… (Get a coffee now)

That’s all. After two or three encodings you will not need this guide anymore.