is via a DV camcorder. If you have a fairly new one of these the chances are it will have an analogue input, and you can connect the video out socket on your VHS machine to the analogue input on the camera. Set the camera to record, and the VHS machine to play, and the camera will do the conversion - then you simply download the footage into your PC from the camera.
If you don't have this type of camera then you'll need to send the analogue content to the PC via a capture card. Some graphics cards have video in connectors, and the Sapphire Radeon X800 XT will handle the transfer of your footage very nicely. Make sure that when you're choosing a card you don't confuse the common TV out connector with the less-common video in socket.
Once you have the hardware side buttoned up it gets easier. You can download an excellent begginner's video editing program from Microsoft - called MovieMaker, or if you have Windows XP you'll find it already there. Just look in Start/all programs/accessories - it's near the bottom of the list.