You need a video capture card to first convert the video from analog to digital format. These aren't necessarily cards anymore - they can be USB devices now.
Then you will likely need encoding software since the default encoder which comes with most video capture cards create an MPEG2 file (very high quality, low compression - basically DVD). If you want an AVI which fits on a CD, you will need to re-encode it.
VideoHelp.com is a good site for tools and guides for all steps of this process.http://www.videohelp.com/