We did this as a regular part of our jam sessions for over a year. Every session recorded - we have hours upon hours of really cool stuff and total crap

- But I would recommend to anyone, especially those in a band trying to write their own music, to record everything!
There are a number of ways. Some that I have used include:
1. A simple microphone into a laptop into some simple MP3 recording software.
2. Better microphones set up in such a way as to capture the room better (I am no engineer, but the dude whose studio we use placed the 2 mics over each other then angled the top one about 30 deg. to the left and the bottom about 30 deg. to the right) Recording into more sophisticated software (Sonar 4.0 Producer's Edition).
3. Mics into a Hard Disc Recorder (a Roland something or other)
The best sounding one was the good mics through really good preamps, into the Delta 1010 into Sonar. These mics are really top-notch - amps were all nicely dispersed throughout the practice space and we were really well balanced with the drums... not too loud - just loud enough to get the character of the amps and guitars without it being a unweildy sonic scenario.
--tz