When we say videogame content on YouTube, we're talking about things like Rooster Teeth's Red vs. Blue Season 1 (Season 2, Season 3, Season 4, Season 5) or Achievement Hunter videos, or Game Grumps, or Two Best Friends Play, just to name a few. Producing your own videos just like these actually isn't all that hard, as long as you have the right hardware.
The first thing you'll need (other than the obvious game console / games / broadband internet for uploads / etc.) is some sort of video capture device. There are lots to choose from these days with the most popular being the Hauppage HDPVR / HDPVR2 / HDPVR 2 Gaming Edition, the Roxio Game Capture HD Pro, or the Elgato Game Capture HD, which are all external units that connect to your consoles via HDMI or component cables, and to your PC via USB. They are easy to set up and use and do a great job.
Most capture devices require you to have a PC to actually store the recorded files to, but some devices such as the Avermedia Game Capture HD have a built-in hard drive that can store files locally. You'll still need to move the files to a PC to actually edit them, but it is very useful to not have to have a PC or laptop close by when you're recording.
All of these devices can record your Xbox 360 gameplay footage in 1080P just fine. High performance does come with a cost, however, and a decent capture unit can run you anywhere from $100 for the Roxio on up to $160+ for the Hauppage HDPVR2 or Elgato. These devices are leagues better than the Adaptec GameBridge we reviewed years ago and are, honestly, worth the cash if you really want to make good quality videos.
It has to be noted that recording PlayStation 3 gameplay isn't as easy as recording the Xbox 360 because the PS3 has blocks that prevent you from recording via HDMI. You can, however, use component cables to still record your PS3 in high definition. Also worth noting is that recording anything that is sub-hd (such as a SNES, N64, Genesis, etc.) doesn't really work very well on these devices and you will be better off with a device meant to record lower-res composite or s-video signals. The Wii, despite only being 480P, works fine. And the Wii U, of course, is HD so it works just like the Xbox 360 as far as recording goes.
Once you have a capture device, you'll need a decent enough PC to actually record and edit the video. Video editing and processing, particularly for HD video, requires a fair bit of hardware muscle. Nothing top end or anything, but a cheap-o PC is definitely going to struggle. It also has to be said that video processing and encoding and uploading, again especially with large-size HD videos, can also take a long time. Patience is key.
We can't offer much help on editing the video, but there is lots and lots of different video editing software out there. Your capture device will most likely come with some sort of simple editor, or you could use Microsoft Movie Maker that is already installed on just about every Windows PC (and, honestly, it isn't too bad), but as you get more experience you might want to move up to more advanced programs with more features like Sony Vegas or Adobe Premiere, which you'll have to pay for.
Adding commentary to your video requires a microphone of some sort. A popular choice among podcasters and many video producers on YouTube is the Blue Snowball microphone for around $60. Any microphone will do, of course, but generally you'll get better quality with a higher-end microphone. And then, of course, you'll probably want to also edit your audio, which requires a program like Audacity, which is free, that will let you encode it in the format of your choice and easily edit it. Then you just have to combine your recorded video and audio files in your video editor (make sure to sync up the audio).
One thing that you have to keep in mind with producing any content on YouTube or elsewhere on the 'net is that it isn't the wild west anymore and you actually do have to follow copyright laws. You can't just use movie or TV clips, or song clips, or whatever else without permission. And if you do try to use them (especially if you want to make money with your videos) YouTube can and will block your video or even ban your account. So you have to be somewhat careful. Yeah, people seem to get away with it all the time, but better to be safe than sorry.
Videogame videos are generally okay to use on YouTube provided you actually recorded the footage yourself. Reviews are considered fair use of the content, so they'll be okay. Recording commentary over gameplay footage is also generally considered fair use. You really shouldn't, however, just record and upload extended un-edited gameplay footage with no commentary or other creative input from you. Those types of videos can be considered copyright infringement and taken down.
Monetizing your YouTube videos is the goal of any content producer, but you have to be extra careful here. Most game companies don't mind if you record their games, but the second you try to make money off of it they consider it a copyright violation and will have your video removed. There isn't any sort of standard policy, however, and every company is different. Microsoft, for example, doesn't care if you record its games, but you absolutely cannot monetize the videos.
Our ultimate advice for monetizing YouTube videos is that it is kind of a huge pain in the butt. Wading through all of the copyright stuff and keeping everything legal is like wandering around in a minefield. What you can do, though, is produce great quality content on YouTube, even if it isn't monetized, and make a name for yourself, and then make money through merchandise sales, affiliate links with retailers, and having ads on your website.
Whether your goal is to try to make money or you just want to share your gaming skills with the world, making game videos on YouTube can be a lot of fun. The whole process can take a long time - editing, encoding, uploading can take hours just for a 10-minute video - but even then it is hard to say it isn't enjoyable. You get to see your raw work come together into a finished and (hopefully) entertaining project, which is immensely satisfying.