Before you buy anything, check to see what kind of video card(s) does your computer has. A lot of machines marketed as "multimedia" PCs already have everything you need.
Hardware-wise, you need a capture device with the appropriate inputs (that is, inputs that match your VCR's outputs). At a minimum, even the cheapest VCR should have an analog RF output and NTSC composite A/V outputs. Others may also have RGB, S-Video, and possibly Firewire, VGA and/or HDMI on high-end machines. Many video cards have one or more of these interfaces built-in and can be used to capture the video, and sometimes the audio. (If it doesn't capture the audio, you would simply plug the audio into the AUX or LINE-IN input on the sound card).
If your computer has a TV tuner that recognizes analog signals, you can use that, as well. Just run a piece of coax from the VCR's RF output to the tuner card's RF input, and tune the card to the VCR's output channel (generally 3 or 4).
You then need capture software to convert the analog input to a digital file, save it, convert it to DVD format, and burn the DVD. Pretty much any video editing software can do this.
Of course, if all this sound like Greek to you, then just buy one of the dedicated adapters mentioned in previous posts, and save yourself the headaches.
Some caveats: No matter how you do this, it's going to take a lot of time, consume a lot of resources (memory and CPU), and require a lot of hard drive space. Depending on the options you choose, as much as 6-8 gig or more of hard drive space might be required to convert an analog VHS tape. (I've had some digital projects consume as much as 20 gig prior to conversion.) Yes, this exceeds the storage capacity of a DVD. But uncompressed video files are huge. Transcoding and compression are applied during the DVD conversion process.
Once you burn the DVD you can delete the project and get the hard drive space back, as someone else mentioned; but make sure you have it to begin with or else your projects will fail.
Finally, be aware that the finished DVD's will only be VHS quality.
-Rich