When you enter the recording's filename, you can also select how long you expect it to last. Later, you can tell Video Capture to automatically stop recording after that time - handy for unattended video transfers.

The VC software is a wizard that guides you through the digitising process
The recordings are limited to a 640 x 480 resolution, which is fine for transfer to an iPod or iPhone, but not the video's optimal PAL resolution - 720 x 576, since you ask. You can digitise at 4:3 or 16:9 aspect ratios.
Video buffs may be disappointed, but given VHS' relatively poor resolution to begin with, this sub-PAL resolution isn't an entirely unjustified trade-off. Upscaling it on an HD TV through an Apple TV box or somesuch, or transferring it to a full PAL DVD, isn't optimal given the inherently blurry nature of VHS, especially when it comes to pre-recorded material.
But it will be a limitation if you have better quality content recorded on a domestic VHS or an analogue camcorder. Would it really have been hard to give us full resolution, Elgato?
We tried the gadget out first by hooking it up to an original Core 2 Duo-based MacBook Air and chose H.264 as the format to encode the video in. The results were poor, to stay the least, with the picture and sound speeded up like hand-cranked film run through a modern, motorised projector. Switching to MPEG 4 yielded mostly good, smooth recordings, but that too-fast playback problem still appeared occasionally.

Click to stop recording - or let VC do it for you after a given time
The Video Capture hardware doesn't encode video itself - it's all handed over to the CPU, so we can blame the software for the glitches. Modern Macs won't have any problem here - the original Air is a special case because high processor temperatures trigger a deliberate core shutdown to bring the temperature back down again. And H.264 encoding puts a lot of strain on the CPU.
COMMENTS
Just use a miniDV camcorder
A lot of miniDV camcorders handle FireWire passthrough, where you can plug in an analog source, have the camera on but not recording and it will pipe the signal into iMovie as DV. I compared this using an old Canon Elura and ElGato's EyeTV 250 which does on board encoding into MPEG 2. Using the camcorder provided far better final picture quality then the EyeTV 250.
Old old technology
This has been around for years! Why would you bother to convert your VHS tapes now if you haven't bothered to for the last 10 years?? You can use a £20 TV card to do an uncompressed capture and easily convert to MPEG4. What a pointless product and one that is at least 5 years out of date!
Another option
Albeit quite a bit more expensive is the BlackMagic H.264 converter:
http://www.blackmagic-design.com/products/videorecorder/
That said, an analog video to DV converter like the Canopus ADVC-110 gives you more flexibility to edit out stuff. You'd have to let it run overnight to compress down to H.264, but that is seldom the limiting factor in converting old videos.
Re: 240 lines
In the broadcast world, "lines" of resolution is not the same thing as scanlines. It's giving you an indication of "horizontal" / per-scan-line / columns of picture detail. Moreover, since the Elgato device has an S-Video port on it, presumably they're expecting some users to play back SVHS cassettes. More information on resolution and VHS / SVHS can be found on this NTSC-centric Wikipedia article:
http://en.wikipedia.org/wiki/S-VHS
Most VHS and SVHS decks record and play back all 625 scan lines of broadcast PAL (of which roughly 576 are intended to be visible, apart from anything lost to overscan). They vary in the amount of detail captured on each of those lines, though. Nonetheless even mediocre VHS is usually good enough to reliably record and play back analogue wide screen signalling and decent SVHS can sometimes record and playback teletext - interesting if you're trying to capture page 888 subtitles.
The NTSC 640x480 resolution of the Elgato device is poor (if depressingly common for "cheap" video capture units) and makes it look rather like a kind of lazy afterthought import with PAL bolted on, throwing away real scan lines which even VHS does record. There isn't much detail to start with so throwing away entire lines of it is just silly - the less you have to start with, the more important it becomes to retain as much of it as possible. No mention of interlaced recording is made and I imagine it does its own deinterlacing job without asking.
If you want to burn a DVD from your 640x480 25 FPS new digital movie, you're going to have it scaled back up to 576 visible lines again, transcode it to MPEG 2 *and* you've lost interlace information; the net result will most likely be quite rough. If Elgato are going to keep the hardware cheap by omitting a dedicated encoder chip, the least they could've done would be to offer an "advanced" settings window which presents the standard QuickTime encoder settings, allowing the user to choose their preferred CODEC (e.g. DV, AIC or ProRes for a near-lossless master, or MPEG 2 for straight-to-DVD use).
Why only Very Horrid System?
Surely it doesn't matter to the unit where the programme comes from as long as it's PAL. It doesn't have to be as bad as VHS - it could be Betamax, V2000, S-VHS, Betacam, other camcorder formats or whatever.
The disappointing thing is that, although it can top and tail recordings after a fashion. I take it that you can't cut unwanted material out of the middle - specifically commercial breaks. Can you pause the recording? Can you record separate segments and stitch them together? I fear not.
