Choose a game that best suits your story idea. If you are developing an action movie, then "Halo" may be perfect. If your script is a family dramedy, perhaps "The Sims" would be more appropriate. Making a high-quality machinima requires not only a visual style that suits your story, but also an understanding of a game's limitations.
For example, while "Halo 3" includes complex camera controls and its own proprietary recording software, the storytelling capacity is hindered by the expressionless characters. Thus, there are both hardware and storytelling considerations to be made before a game is decided upon. If you wanted to make a World War 2 movie, "Call of Duty" may seem perfect, but camera control will largely be limited by the player's perspective, necessitating additional crew members to serve as camera people.
Of course, no game is perfect. So choose the game that best fits your needs, then try and twist the negatives into positives. An excellent example would be "This Spartan Life," which uses "Halo" for an interview show. While the creators benefit from exceptional camera controls, the production is often interrupted by other players interfering. Rather than a hindrance, the violence raging around them has become one of the show's charms.
Purchase a capture software. Two prominent programs are FRAPS and Gamecam. Both can be used for capturing high-quality streaming video or stills. Both programs are compatible with DirectX- and OpenGL-based games.
Do it live. Here's where machinima gets collaborative. While it is animation, machinima typically involves the live capture of pre-orchestrated events. This means you need actors to conduct the actions required for the particular scene. Depending upon the game, you might also need camera people, who are playing the game with a specific perspective in mind. The camera people run the capture software, while your actors orchestrate the necessary events.
Shoot multiple angles. One of the greatest advantages of machinima is the ability to shoot over and over with no consequence. You can capture an explosion from a thousand different distances and angles. Consider traditional film editing, especially if you are constricted to the movements allowed in-game, which can force you into considering unique methods to achieve shot variety.
Record all the dialogue and sound effects. Unlike traditional filming, machinima does not require field equipment. Instead, consider purchasing a tabletop USB microphone suitable for podcasts. Popular models start as low as $139 (Blue Microphone's Snowball).
Edit the movie. It can be achieved in iMovie, Windows Movie Maker or more advanced programs such as Final Cut Pro. Consider recording your audio directly into your editing program for easy syncing. Your finished piece should be taking shape. Try to anticipate your editing needs in advance. Luckily, it is easy to go back and shoot more footage when using machinima.
Determine what your rights are in displaying and sharing your new creation. These rights are determined by the video game maker (although you do have vague legal protection under fair use doctrines). Because machinima has blossomed into such a prolific field, most video game developers have declarations explaining their company policy. Everyone loves free publicity, so most game companies encourage machinima production. Now that the legal hurdles are cleared, it's finally time to show it off.