Thank you so much Dominic. Your info was very helpful. I think that the following might be just a little clearer for people who are not computer whizkids, like myself. I copied and pasted it from another link:
Right click on the speaker icon in the notification area and click Recording devices :

Sound Window will open. Right click in an empty place inside and check the option saying “Show disabled devices“.
You will find a grayed out icon named “Stereo mix” . Right click over it > click Properties > in Properties window, fromDecive usage drop down box select “Use this device ( Enable)”
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Click OK and the window will close.
Now, open any sound recording software, choose “Stereo mix” as recording device and you will be able to record the system or PC sounds in Windows 7 .