First of all, you need video recording software.

Recommended recording software: Fraps

The first step: recording
1) Start up Fraps (Note: Make sure that you load Fraps before you start Eudemons, or it will crash your client [Known bug].)

2) Once in game, open Fraps (By double clicking it in the system tray [bottom right corner] and click the 'Movies' tab. You should have all the settings set to something like this:
  Video capture hotkey: F9 (Or whatever you prefer)
  Folder to save movies in: C:\Fraps
  Full-Size
  30fps
  Detect best sound input
  (You can also tick or untick record sound. Probably better not to as you can add music later.)

3) Go in game and record by pressing F9. A yellow FPS will appear in one of the corners; this will change to red when it is recording.
  After obtaining the footage, press F9 again to end recording.

4) You have now begun your movie. (Note: It is usually advisable to make a few recordings rather than one big one, as it makes it easier to edit later, plus the size of the videos can get unmanageable.)

The second step: editing
Recommended software: Windows Movie Maker

(Click Start Menu > All Programs, and it should be listed there. If not go to: C:\ProgramFiles\MovieMaker\moviemk.exe.).

1) On the left side of the general interface. Click 'Import Video', and browse to C:\Fraps (This is where your video will be that you recorded.) Select your video and import it.

2) Add video transitions; click 'View video transitions' on the left side. From here you can view, and select different transitions to add to your movie..

3) Add credits at the beginning and end. First, select from the left side: 'Make titles or credits.' Here, you can select where you want the title to go, add the text and get a preview in the 'preview' window. After you make the title, you can also movie it around via dragging it on the storyboard. (Keeping in mind that there are different animations and text/background colors you can choose!).

4) Add music/sound. To do this, click 'Import audio or music' from the left side in the main interface. Browse to your favorite track on your computer, and click 'import'. Once the Sound file has finished uploading, you can proceed to drag it onto your storyboard underneath your video. You can change the length by dragging each side, and right click it on the storyboard to change a few effects such as fading in and out. You can add as many songs as you want, just remember to make sure it is the same length as the movie! (match the ends of each line!).

5) Before you finish, preview the movie by clicking the |> button on the preview box. If it is all ok, click 'Save to my computer' on the left side. Choose a name and a save location, and click next. Generally, the 'best quality for computer' should be ok, however you can select more choices, and try saving in different ways, if you want the quality to be better..

6) How to add a watermark.
When you have finished the movie without a water mark, put that video in WMM format again and then proceed to put in: "subtitles", click it on the right bottom right corner and hit: eo.99.com.

You can refer to the following link for more details: http://www.metacafe.com/watch/461846/add_your_image_logo_to_your_video_in_movie_maker/