Personal and small studios can be broken into two main categories: analog and digital. Most producers prefer to work with digital audio because of the availability of equipment and support.
A powerful personal computer with a large hard drive, fast processor and at least 2 gigabytes of RAM memory can be used as the backbone of any digital music endeavor.
Digital audio workstations, or DAWs, are powerful software and sometimes hardware bundles that provide the basic structure of a recording studio within the digital realm of your computer.
Analog audio signal from instruments must be converted to digital code for the computer by means of quality audio interfaces.
Plug-ins are separate pieces of software that digitally "plug into" your digital audio workstation and provide effects, waveform editing and synthetic audio generation.
Recording requires excellent room acoustics to capture a natural sound. Soundproofing kits can be purchased or built to improve the acoustic profile of any room.