I found this to be such a useful guide, and it took me so long to find it, I’m reproducing it here in case the original site goes. (hope the author doesn’t object, again, this isn’t my own work)
Here’s how to record your Mac’s audio for free. Lotsa steps, but remember that some of this stuff is one time only :)
1. Download Soundflower. Drag the Soundflowerbed app into your Applications folder, then run the installer that’s also in the disk image (do it in that order because the installer will require a reboot, and otherwise you’d have to open up the disk image a second time just to grab Soundflowerbed).
2. Grab a copy of Audacity if you don’t already have a recording app you like.
3. Launch Soundflowerbed, so that it’s in your menu bar. You can always add it to your login items if you use it regularly.
4. Launch Audio MIDI Setup, in your Application/Utilities folder. Under the Audio Devices tab, set the default output to Soundflower (2ch).
5. Go up to the Soundflowerapp menu and tick “Built-in Audio” (or whatever you normally use) under the 2ch section. Toggle this between that and None, while any old app that makes sound is running, to verify that audio is being sent there (because the output cuts in and out).
6. Launch Audacity. In its preferences, under the Audio I/O tab, set the playback device to built-in audio and the recording device to Soundflower (2ch).
7. You’re ready to record. Audacity will turn off Soundflower monitoring as soon as you hit the record button, and instead send its own monitoring out to the speakers (but since Soundflower is its input, it’s all the same stream to your ears). After you’re done recording, you can re-enable direct Soundflower monitoring again from its menu.
All that’s easier done than said, it’s really just a few clicks if you take the explanation out of the way. :D
8. When you’re done capturing, you can put things back to normal back in Audio MIDI Setup.
Over in Audio MIDI setup, one of the things you can do is set Soundflower to be both the default input and output, then Soundflowerbed will let you monitor through the real speakers.
