Reddit mentions of Presonus AudioBox 22VSL 24-Bit/96 kHz 2x2 USB 2.0 Audio Interface

With a sound card made for studio usage, lag/latency shouldn't be a major issue. Some basic knowledge is required to set it up, but that same knowledge is required for any sort of computer-based recording, so it's easy to come by these days! There's tons of materials about this online, but I'll write a brief summary (not to be considered a tutorial!).
(I'm assuming Windows usage here. For Macs, the default sound card may be good enough -- it was in my 2006 and 2011 Macbook Pros. Apple's Core Audio API is really good for a OS stock one!)

You need a sound card (or: "audio interface") with good ASIO drivers. In practice, that means one that is designed for studio use. That doesn't have to mean anything very expensive, though. The cheapest ones are about $100-120, but a pretty decent one is probably more like $180.
A few examples:
FocusRite Scarlett 2i2 (a 2nd generation is on the way, so I wouldn't recommend this right now. Also, I returned my Scarlett 2i4 due to having issues.)
Roland Quad Capture (the one I use personally)
Presonus AudioBox 22VSL

The sound card you already have might work well enough with the ASIO4ALL driver, in which case you may be able to use the hardware you already have.

Once you have one of those, you install the drivers and set up the ASIO latency or buffer size (different names, same thing) to some low value. You might have to tweak this -- having too low a value will cause dropouts as the computer doesn't have time to apply effects and so on before it's time to move the sound to the speakers.

With that in place, there are a few ways to go. You need some sort of effects (like amplifiers, cabinets, delays, EQs and so on); the easy way to do this is to use some package. I mostly use Guitar Rig for this, but there are plenty of others, such as AmpliTube and Peavey ReValver. There are fully free options as well, e.g. the LePou plugins.

You can use those in several ways. The simplest would be to use a simple audio editor, like Audacity. Another way would be to use a DAW (Digital Audio Workstation), i.e. an application used for recording music, with tracks and mixers.
I use REAPER for that, as it's about $60 and I still prefer it to ones that cost ten times as much. Other popular choices are Cubase, Logic (Mac), Pro Tools, and so on.

So, yeah, it's a bit of an involved process... but once you're there, the main difference between playing for fun (to a track or by yourself) and recording an album is clicking the record button before you start playing. :)
As for cost, that really varies. If you're lucky and your sound card works well with ASIO4ALL (or you have a Mac and that works well), you can do this for free. If you need to buy a sound card and want to use the software legally, you might have to pay a few hundred bucks for the combo.

I use the PreSonus Audiobox 22VSL with a USB 2.0 interface. Basically it's a little box with instrument (or mic cable) inputs and a headphone/speaker output that sits next to your computer. Looks like you can get one for around $200 now.

I can give you a quick review. Sound quality is really good, both for instruments & vocals, and for playback as a headphone amp. I use it mostly for headphone practice, and I often record practice sessions to see just how bad I really sound.

It comes with Studio One Artist, a relatively full-featured sequencer/mixer program that lets you loop drums and edit tracks, apply FX, then mix down for recording. It also includes a number of sound libraries for drums, piano, guitar, plus effects, speaker/amp emulation and all that kind of thing.

Con: if you want to "live-monitor" your mix, in other words listen to yourself playing plus effects loops plus other tracks, then there's a small playback delay. You hit the string and a half second later, you hear the sound. I believe this is due to the USB connection speed, and maybe a firewire or PCI connection would eliminate some of the delay. (It might also be that I don't have my USB 2.0 set up the right way...I'm kind of an idiot.) However there's a knob on the front of the box that lets you mix the preamp and the post-processed playback for your instrument...so you can hear just the preamp (with onboard FX if you use them) with no delay if it weirds you out trying to play in the future, as it were.

Con 2: I haven't been able to get the mic input to work with some software, for example Skype, or Mumble/Teamspeak. If you're an online gamer, this probably won't replace your mic unless you can figure how to make it work. It's a little bit hinky to get your computer OS to recognize the Audiobox as your "sound card" in order to route game and other audio through it, but with some finagling I finally got it to work.

I don't really think there's a clear answer for this, but the good news is that there are many excellent options these days. Sound quality isn't always the most important aspect to consider. Many artists have had great success with just an SM58 microphone hooked up to their computer. If you're just starting up and you don't need studio quality recordings, something like this might be fine. I often just use a basic handheld mic when I'm multitracking a new arrangement for my group to learn. It's quick, simple, and often easier for recording beatboxing with too. There are plenty of free or affordable programs available for multitracking too, so the mic will be your main expense.

If you're looking to make some top quality recordings, you can expect to start spending more as well. Not going to lie - this is where it can get complicated and expensive. I'd recommend starting basic and get a decent condenser mic with a stand and a pop screen, a soundcard or usb mixer with a decent preamp, and stick with the cheaper software for recording.

If you find you're getting more serious with your recordings you may want to upgrade the microphone to a Neumann, install some noise dampening panels, and look into a DAW (digital audio workstation, or recording software) such as Pro Tools.

Whatever you do, don't spend too much on overpriced cables. Check out Monoprice

So, here's the build. Due to rule 2 for contributors I have created two builds. Please note that the first one goes well over your budget before rebates and promo discounts. It is a $1227 build. Remove the audio box and it becomes $1027. That means after discounts and rebates it becomes 889. I have an edited build underneath that fits your budget better.

PCPartPicker part list / Price breakdown by merchant / Benchmarks

Type|Item|Price

----|:----|:----
CPU | Intel Core i5-3570 3.4GHz Quad-Core Processor | $206.97 @ Outlet PC
Motherboard | ASRock Z75 Pro3 ATX LGA1155 Motherboard | Purchased For $0.00
Memory | Crucial Ballistix Sport XT 8GB (2 x 4GB) DDR3-1600 Memory | $54.99 @ Newegg
Storage | Samsung 840 Series 120GB 2.5" Solid State Disk | Purchased For $0.00
Storage | Western Digital Caviar Blue 1TB 3.5" 7200RPM Internal Hard Drive | $59.98 @ Outlet PC
Video Card | Zotac GeForce GTX 760 2GB Video Card | $248.98 @ SuperBiiz
Case | Sentey GS-6050 II Halcon (Black) ATX Mid Tower Case | $29.00 @ Newegg
Power Supply | Corsair CX 500W 80 PLUS Bronze Certified ATX12V Power Supply | $34.99 @ Newegg
Optical Drive | LG GH24NS95 DVD/CD Writer | $14.94 @ Newegg
Operating System | Microsoft Windows 8 (OEM) (64-bit) | Purchased For $0.00
Monitor | Asus VH238H 23.0" Monitor | $119.99 @ Newegg
Monitor | Asus VH238H 23.0" Monitor | $119.99 @ Newegg
Other| PreSonus Audio Box| $199.95
| | Total
| Prices include shipping, taxes, and discounts when available. | $1089.78
| Generated by PCPartPicker 2013-07-28 23:54 EDT-0400 |

CPU: Will perform all the tasks you need it to efficiently. Has 4 cores that work really efficiently and quick.

Memory: The only difference between the memory I chose and the memory you chose is that mine has heat spreaders on it, which are potentially helpful if your RAM ever starts to heat up.

Storage: The 1TB Caviar Blue will hold all the files you need, and you have plenty of room in the case and motherboard support to get more drives.

Video Card: The GTX 760 is a very high performance card. Somewhat pricey, it performs great and is among the newest line of cards out from nVidia right now.

Case: A well liked case, with a window and LEDs, that will fit what you've got. With your semi-modular PSU, cable management shouldn't be that much of an issue. Also has a lot of air flow.

PSU: Way better than your selected PSU. CoolMax makes cheap entry-level PSUs with very poor quality parts that are more likely to fail on you and perform worse. This PSU is semi-modular, which will make managing cables slightly easier, is rated more efficiently, and is built more soundly.

Audio Box: Just a little trinket to add to the system. This is not at all necessary, but may be worthwhile if you have no equipment for recording yet.

PCPartPicker part list / Price breakdown by merchant / Benchmarks

Type|Item|Price

----|:----|:----
CPU | Intel Core i5-3570 3.4GHz Quad-Core Processor | $214.99 @ Newegg
Motherboard | ASRock Z75 Pro3 ATX LGA1155 Motherboard | Purchased For $0.00
Memory | Crucial Ballistix Sport XT 8GB (2 x 4GB) DDR3-1600 Memory | $54.99 @ Newegg
Storage | Samsung 840 Series 120GB 2.5" Solid State Disk | Purchased For $0.00
Storage | Western Digital Caviar Blue 1TB 3.5" 7200RPM Internal Hard Drive | $59.98 @ Outlet PC
Video Card | Asus GeForce GTX 660 2GB Video Card | $189.99 @ Newegg
Case | Sentey GS-6050 II Halcon (Black) ATX Mid Tower Case | $29.00 @ Newegg
Power Supply | Corsair CX 500W 80 PLUS Bronze Certified ATX12V Power Supply | $34.99 @ Newegg
Optical Drive | LG GH24NS95 DVD/CD Writer | $14.94 @ Newegg
Operating System | Microsoft Windows 8 (OEM) (64-bit) | Purchased For $0.00
Monitor | AOC e2351F 60Hz 23.0" Monitor | $117.47 @ TigerDirect
Monitor | AOC e2351F 60Hz 23.0" Monitor | $117.47 @ TigerDirect
| | Total
| Prices include shipping, taxes, and discounts when available. | $819.82
| Generated by PCPartPicker 2013-07-29 00:06 EDT-0400 |

This build fits your budget better before discounts are applied. The differences are that your monitors are cheaper because they are not on sale, which effects the price before discount. Also instead of the newer 760 I have selected a previous gen 660. The 660 will still work very well, has two fans and a good cooling system so you can even overclock it slightly.

If you have ANY questions, do not hesitate to ask. I will be going to sleep shorty, so you may not get a response for a few hours though.

This helps a ton. Great advice, and thanks for being so in depth. Programming drums is entirely new to me, and it's deceptively difficult. My buddy makes it look easy, but then again, he gets paid to do it.

As for my POD X3 Live, yes it does have a USB 2.0 connection, but from what I can tell its main purpose is to upload/download presets to it, it's not for recording. I know this because I first started experimenting with it and the sound was god awful. I alleviated this by buying a cheap ($200) audio interface with only two channels, and then used the D/I input. The interface is a Presonus:

http://www.amazon.com/PreSonus-AudioBox-Advanced-Recording-Interface/dp/B005G6CZRE

I don't know how good it is, but now that I have a few of your tips, maybe I'll be able to start getting some decents sounds out of it.

Hey man, I'm also rocking KRK 8's (I have the first gen though) and I purchased this sound card: http://www.amazon.com/PreSonus-AudioBox-Advanced-Recording-Interface/dp/B005G6CZRE locally. It's been pretty flawless for months, and I love it. Very simple. That's my two cents.

Yeah, I've heard on another post where I was asking a different audio question that my XENYX is the main suspect for my audio problems, so I should consider switching it out. I wasn't sure if it was the mixer itself or that both the mixer's sound card and the computer's sound card sucked, or whatever (I don't have multiple pieces of equipment to test). But all things considered now, I really don't need a mixer anyway. I'm only ever recording me (one thing at a time), and for anything that requires EQ or anything like that I just use a DAW, so I am thinking that Focusrite Solo is perfect for me.

mmm the PreSonus Audiobox you linked, I've heard pretty bad things about it. However I did hear great things about the similarly named PreSonus AudioBox 22VSL. It's $175 compared to the Focusrite's $100 (or $150 for 2 XLR input), so I'll probably pick up the Focusrite anyway.

That said I won't have enough money for both the Focusrite and an SM58. I've had my eyes on the SM48-LC for a while. People say it's obviously not as good at the SM58 but still pretty much right up there, but at a 70% discount. I'll probably pick that up.

$100+$30+tax = ~$141. Mmmmmmmm so expensive to me but compared to anything else it is looking like a stellar deal.

Presonus Audiobox 22VSL

It is a bit pricier than most interfaces in the same price range. However, it does allow you to EQ, Compress and have a few effects on your vocals while recording.

Oh my, so many terrible answers. You need a turntable with RCA outs to a phono preamp, then run that to a soundcard, or get a soundcard with multiple instrument ins and use those. This would work fine:

http://www.amazon.com/Presonus-AudioBox-22VSL-24-Bit-Interface/dp/B005G6CZRE

Then record to software.