OK, here is the long answer to the above question.
To properly record TV program (here I am only talking about "instant recording", not "scheduled recording" which is done through Media Scheduler):
1. (Optional) Choose TV Options->Configure TV... from the right-click menu while TV is playing. Click "Configure Capture" button. In lower portion of the resulting dialog window there is a check box "Automatically Save Recorded Video To A Unique File" (checked by default). If it is checked, there are two Radio buttons from which you need to choose one: "Automatically Generate A Unique File Name" or "User Specified File Name". It is recommended that you keep default settings here. With default settings, each recorded piece of video is saved in a unique file, whose name is constructed using the channel number and the time you started recording. They are in a folder you specify in step 2 below. You configure other settings in this dialog window, most of them are self-explanatory. For example you can choose your favorite video compressor.
2. (Optional, but recommended) Choose TV Recording->Allocate Temp Capture File Space... from the right-click menu. This preallocates a large file (you choose how large it should be, and it should be larger than your estimated recorded video file). Preallocation of recording space increases recording efficiency and reduces recording errors, resulting in fewer dropped frames. This is also the place for you specify the location of your recorded video files. When you start recording, the recorded video goes to this temporary file, and later copied to another file depending on how you configured it in step 1 above. If you do not preallocate, the program will record to a file called TempCaptureFile.AVI (not preallocated), located in \Video folder, where would be the drive with largest free disk space on your machine. All your video files will also go into this folder unless you specify otherwise during each recording (see step 1 above).
3. Choose TV Recording->Start Recording... from the right-click menu to start recording session.
4. Choose TV Recording->Stop Recording... from the right-click menu to stop recording. Exception: Users of Hauppauge WinTV VfW driver (you need to use this only if your OS is Windows 98 or earlier. Windows 98 SE and later users should all use WDM driver), clicking the right mouse button will stop recording.
5. (Optional) Choose TV Recording->Save Captured Video As... from right-click menu to copy the video that you just recorded to a location of your specification, i.e. copy it from TempCaptureFile.AVI to another file. You do not need to do this is if you keep default settings in step 1.