"Ripping" Is the process of copying (HD)DVD/BR Files from a disk and transferring them to your hard drive.
Transcoding is the process of taking the files that you just ripped and encoding them in a more efficient format to save space. Popular codecs like Divx, Xvid and x264 are just a few examples. Likewise, you can also encode the audio to other formats like vorbis, mp3 or aac.
Another way to save space is to use tools like vob blanker, or ifoedit to delete unwanted "features" like extra audio, menus etc... leaving just the main movie. This way is perferred as it causes no quality loss when compared to transcoding.
By the way, it is highly suggested that you not discuss illegal torrents/downloading movies around here.
Oh and yes, I have a massive collection of movies and anime that I rip and convert to mkv with x264 and vorbis.
EDIT: Please dont double (or triple for that matter) post.