Diskwriter is an audio device you can choose when you create a zone, like choosing ASIO or Direct Sound. You can create such a zone and call it "Recorder" if you want. In the device settings for the zone, you choose the path of where the recording is stored. The problem is, when you choose this zone, there is no audio output to listen to, it does it all "silently". Therefore, let's say you are listening to internet radio using your "Laptop" zone; you would right-clock that zone while listening, choose "Link", and choose the "Recorder" zone. When you do this, the audio stream goes to both zones at the same time and you can therefore listen to what you are recording. To stop the recording, first unlink the zones (by right clicking again) go to the "Recorder" zone and press the stop button. The recording will be as a .wav in the path specified in the device settings.
Hope that helps!