sorry buddy. I don't think your friend knew what he was talking about.
Fraps does little to no encoding at all, that's why the files are so big.
FRAPS show fps, record video game movies, screen capture software
Why is the AVI movie generated by Fraps so big? How can I reduce the size?
The filesize is big because there isnt enough time to encode the movie while the game is running. The movie frames are slightly compressed, but still require a large amount of disk space due to the high resolutions. After you have finished capturing you can convert the clips into a compressed format using a video editing program. Probably the easiest one to use is Windows Movie Maker which is included free as part of Windows Live Essentials. It allows you to easily edit your clips and add text and other effects to your film. The end result will also be compressed into the Windows Media Video (WMV) format which can be played back in most media players.
you'll want to use a different program that can do on-the-fly encoding with hardware support.
something like the Hauppauge Colossus
and the software that it comes with.
with the Colossus, nearly all encoding is done on the card, thus freeing up your CPU for your game. files are small too, which won't be limited by the speed of your hard drive.