Hello,
Unfortunately, the process would be easier if you have a Digital Video Camcorder (one which uses DV Tapes)...then you could simply hook it up to your PC using a DV or Firewire cable.
Unfortunately you'll have to take more steps with analoge VHS tape. First of all, you'll need a PCI TV in/out card on your PC, with either S-Video or Composite, or both ports on the card. Most TV in/out cards are accompanied with the correct cables, but if not, you'll need to buy a Composite cable or the correct S-Video cable (for there are some fussy televisions and cards which require different pins on the S-Video cable). S-Video is a cable which transmits chrominance and luminance signals on seperate lines, giving a clearer image. Composite delivers the same signal, but instead the luminance signal doens't have it's own line, so there is some loss in picture quality. Both S-Video and Composite do not transmit audio.
Using which cables depends on the sockets you have available on your VCR or Camcorder. If you don't have an S-Video socket on your VCR, you can buy a special S-Video / Composite / Audio adapator which fits into the SCART socket. You would then simply connect the S-Video or Composite cable to the socket, flick the in/out switch so the data is transmitted to the right direction (so VCR > PC), insert the VHS tape, play and record using special software on your PC (cards usually come with one). You can however buy the software seperately. You could also hook up an auxilary audio cable (Left & Right jacks to 3.5mm male cable) into the SCART Adaptor, and the computer's 'Line-In' jack to capture audio. If your VHS Camcorder has an S-Video or composite socket, you could simply do the same (but without need of a SCART Adaptor obviously). If is has audio out, then you could simply hook a 3.5mm male to 3.5mm male audio jack from the camcorder to your PC's Lin-In port.
The software should allow you to select between S-Video and Composite signals, along with the audio signal too. It should capture both and save it as MPEG.
Hope this helps