I record tracks from vinyl into an AIFF file using a program called "CD Spin Doctor". It comes as part of Toast Deluxe 4 (which I believe is called "E-Z CD Creator Deluxe" on PC)...
Once I have recorded the track. I then edit out any space at the beginning and end of the track, boost sound levels, etc. while still using CD Spin Doctor.
Once I get the song to sound the way I want it to, I then use SoundJam MP to convert the file to MP3.
SoundJam is (in my opinion) the best MP3 player/converter available for the Mac, I am not sure if they have a PC version available. SoundJam allows you to convert any audio file to MP3, WAV, AIFF, MP2, etc...
I have my turntables connected to my mixer. My mixer is connected to my computer. I play records and record them as WAV files onto my computer's hard drive, which I then convert to MP3 files using the MusicMatch (free) program that Chyqo mentioned. I try to adjust and tweak the levels with my mixer's equalizer before recording the music onto my PC's hard drive. I do have an audio editing program (SAW32Lite), which I use to edit the beginning and end of each song, so there are no unnecessary gaps between tracks when transferring the audio to CD-R. My CD-burning program is Adaptec's EZ CD Creator. You need a good sound card in order for your computer to do a decent job in recording audio. I use a "Turtle Beach" sound card, which sells for about $100 and does a very nice job in preserving audio quality. Oh, yeah. Make sure to use a good needle, or else your vinyl won't sound too good to begin with. You can get pretty good sound (and scratching) from the Shure M44-7 or the Audio Technica ATP-2 stylus.
I hope that helped,
Fernando Benitez from San Diego, CA