Found this article on Lifehacker. Great stuff!

Here's part of the article:
Have you ever wanted to save a segment of video from your favorite DVD for
watching later without fast-forwarding all the way through the movie? VLC 1.0
adds a new "Record" feature to help you.

Over at the How-To Geek web site (my home away from Lifehacker), blogger
Mysticgeek writes up how to enable the new recording features: just use the
View -> Advanced Controls menu item, and then you can record videos by hitting
the record button to start saving the video, and then pressing it again when
you are done. You'll find the segment of the video in your Documents folder,
saved in MPG format.

This isn't quite the same as ripping a DVD, which we've covered many times
before—but you could use it for that purpose if you wanted to, especially if
you wanted to cut out the stuff at the beginning of a movie that isn't
necessary. Readers should note that it doesn't seem to work with just any
video, but we've successfully tested it with a number of DVDs and even AVI
files that seemed to work without problems.