Setting Up Audacity Preferences
Before beginning a recording project in Audacity, it's necessary to set the Audacity preferences in the Edit Preferences dialog box. This ensures that the sound source and playback options are set correctly as well as bit-rate, quality indicators and more.
Setting Up Audacity Preferences on Your Computer
Follow this step by step procedure to setup your computer. Obviously you must download and install the software first, which you can get from http://audacity.sourceforge.net.
Launch Audacity
Step 1. Check the Preferences
Checking the Audacity preferences is very important step and should be done before
you begin editing any audio. You can locate the Preferences Dialog box by
going to Edit Preferences, or the shortcut key combination Control P 
Step 3. Set Audio Input & Outputs
Select the Audio I/O tab from the choices across the top of the Preferences Dialog box. I/O is short for Input Output and is where you’ll tell it to record your sound from and where to play it back.
Step 4. Set Playback Output
From the drop down window under Playback, select the output device that you would like to route the sound through. In this case, I’m sending it to the sound card in my computer.
Step 5. Set Recording Input
From the drop down window under Recording, select the sound source you want to record from. In this case, I’m selecting the Logitech USB Headset, because that is the microphone that I’m going to use to record some voiceover narration.
If you’re recording music, you probably want the Check box next to Record in Stereo checked. If you’re just recording your voice, leave it unchecked. Usually, you’ll leave the check box unchecked for "Play other tracks while recording new one".
Step 6. Sound Quality Tab
The Quality tab is where you’ll set the quality of your audio. The higher the sample rate, the better quality your audio, but the larger the file size will be. For CD quality sound, record at 44,100 Hz. You’ll typically leave the other settings at their factory defaults.
View the full size narrated Flash tutorial - Setting Audacity Preferences (1:28)
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