Originally posted by LeroyHowever, the cheapest way to do it would be to record the audio output of your TV or DVD into the mic or line input of your computer. You could get the right cable for about $5 at Radio Shack.
The right cable is a mini-stereo to mini-stereo cable. EDIT: Leroy's response below is better; I had a brain-freeze.
If one has a Creative (What U Hear) or Realtek (Stereo Mix) sound card then one does not even need a cable. Couple a cable/no-cable setup with Audacity and you're set.
It's not a full TV replacement - it's more of a TV on Demand option. So far I haven't really used it much except to send out invites to people. The quality looks pretty good and the couple of Robot Chicken episodes I put on came through fine.