To summarize, megui is basically a GUI front-end for x264/avisynth. While it may seem like something to get into, if you're at all serious about video production you're going to be using x264 one way or another, through command-like ffmpeg or GUI's like megui or Simple x264 Launcher.
Fraps files are compressed, but not nearly enough for good upload speeds or distribution as you well know. The function of megui and such is to turn things like fraps files into much smaller, more malleable formats. So, I can stick entire sc2 games into only a few hundred megs while retaining extremely high quality at 1920x1200 resolution.
The difference between this and programs like growler guncam is guncam tends to do its own conversion. This tends to result in several problems, the first and foremost being performance. Fraps has its performance bottlenecks, but not nearly as problematic as doing compression in real-time. Additionally, programs like growler won't offer you nearly the kind of quality returns as a real pipeline will offer.
Megui and similar programs rely on avisynth scripts to feed them information. In comparison to the complications of high-end Staredit triggering these are child's play, with scripts looking as simple as this;
AVISource("E:\manlatcher\VirtualDub 2012-04-10 19-53-21-49.avi")
ConvertToYV12()
The scripts have much more power then just feeding the programs file names, but the idea is there.
To simplify the process of generating scripts for huge quantites of fraps files (I encoded sc2 stuff in chunks of 60 files), I use another free app called Avisynth Batch Scripter. The template I fed the program to generate stuff was this,
+AVISource("%PATH%\%CLIP%.%EXT%")
My youtube channel has a more detailed video guide regarding my process if you're interested in getting into it, just search it for "Megui".
Avisynth, megui, Simple X264 Launcher, and AVI batch scripter are all free.
I have been long time tempted to write a huge video recording/processing guide but figured few people, if anyone, would make use of it...
Show them your butt, and when you do, slap it so it creates a sound akin to a chorus of screaming spider monkeys flogging a chime with cacti. Only then can you find your destiny at the tip of the shaft.