This is a topic that often comes up among my students and on guitar forums. It's of course a very subjective topic - some people are after a high gain, saturated distortion for rhythm "chugga-chugga" sounds, where as others may be looking for that Albert Lee country picking tone, or SRV blues tone, etc. Nonetheless, there are several ways to record your guitar. I'm going to give you my perspective and advice, based on what I find works best for me.
Using digital technology
Back in the day when I started playing, many of my friends used Marshall and Peavey combos, and tried micing them best they could. When you get set up right, this method will sound absolutely great. Then digital processors started showing up in the late 80s. I tried a few back then, and I was young and easily impressed by all the effects. Truth is, most of them sounded like crap .I just didn't know it at the time. I had no understanding of good guitar tone, and I openly admit that. I had a Roland GP8 at one time, and it was quite awful indeed.
I do remember that the Rockman headphone amp sounded quite good. It only had one tone really, but it was not bad. Truth be told, I thought it sounded better than most of the Roland and Zoom units that came after it, at least until the mid 90s.
Nowadays, we have an amazing variety of quality processors and software, from companies such as Line 6, Zoom, Apogee, Apple, Boss, Peavey, Fractal Audio, Avid, etc. Most of them are capable of very good guitar tones.
Personally, I do prefer the sound from a good amp, like an old vintage Fender or Marshall, with the volume turned up real loud. Then, add a Shure SM-57 about an inch from the grille, placed 50-60 percent from the center axis to the outer rim of the speaker. Now what's wrong with this picture? It's going to get LOUD! Furthermore, I find it to be inconvenient to be micing my amp, for a few reasons. Firstly, I do not have a dedicated studio for recording my amp, with an amp booth and all the cables and hookups ready at any time. For me, it's just a hassle, because I have to spend plenty of time rigging up the gear every time I record, and test mic placement, and yadda, yadda. Frustrating I would say, if recording is something you don't do every day.
The other thing is the volume. I scare away all pets and family members, if I sit and record a few hours of my 100 watt Marshall being turned up! The other possibility is they kick ME out! If you have a studio set up for loud sounds without interfering with other people, good for you. Unfortunately I don't have that luxury.
Which option to choose
It is probably not going to surprise you to hear that I vote for using digital technology when recording electric guitar. The main 2 reasons are 1) volume is a non-issue (I can do it all through headphones if I need to) and 2) it is very convenient. I don't have to worry about spending time testing mics and mic placement, tube amp choice, tubes, mic preamps, recording room, etc. I have my favourite sounds stored, and I plug my guitar into my unit, and then into the computer. The sound is going to be the same as last week, because the variables involved do not change, like they do with the amp scenario described above. I admit that my digital tone may not be 100 percent as good as micing my best sounding amp, but boy, is it ever more convenient and quicker to get set up! Working faster means for me less frustration and more productivity. The more I have to fiddle with stuff, the lesser my inspiration to actually play will be. It's just how I am.
Now, do remember this is only my personal view on recording electric guitar. I have chosen my way of recording based my physical set up and my preferred way of working. Both ways can lead to great guitar tones - you just have to find what you prefer, and you will also need to learn how to get the best possible out of your gear. That's where you can learn from others. Ask on guitar forums, stores and perhaps even pro players. The more you learn, the better your tone will be.
My choice for recording guitar tone
I use Line 6 gear, because they make really good sounding gear, and it is not super expensive either. They are also very forward thinking. They come up with ingenious solutions to guitar players' needs, and they don't rest on their laurels. I applaud them for that.
There are of course other manufacturers worth checking out too - I mentioned some of them earlier in this article. I have not tried many of them, but I have extensive experience working with Line 6 gear, and that is why have settled for Line 6 products.
I like using Pod Farm 2, because with it, I can record my guitar tone dry, and then simply try which ever guitar tone as I listen to the recording. This is a fantastic way of doing it, I find. Because the guitar is recorded dry, I don't ever have to re-record it! If I don't like that Marshall patch chosen, I simple go to a menu in the software and pick a Hiwatt or Fender amp tone instead. How cool is that! That is for me a super effective way of doing things. Why do I need this you may wonder? Well, it could be I chose a Marshall 800 type of tone when recording, but when I listen back to the final mix, the guitar tone doesn't fit, for whatever reason. I could spend time eq-ing and messing around, or, if I use Pod Farm 2, I could simply choose a different amp model (perhaps a Plexi) and instantly hear the difference. I love this approach. This way, I never need to re-record my guitar!
Now the HD 500 has some wicked features that makes it special. It uses that special "HD" technology that Line 6 spent so much effort developing. The end result is more natural sounding amp sounds, and more natural and responsive feel when you play through one of these units. The smaller brothers, the HD400 and HD300 are great too, but the HD 500 has the upper hand - it allows for dual amp models. This means you can blend 2 amps together, and it is very cool indeed. For example, a Plexi Marshall amp model run together with a Hiwatt amp model sounds very fat and is loads of fun when recording. The drawback is that you can't record dry and add effects and amp models later, the same way you can with POD Studio and Pod Farm 2.
I find that for most of the time, I am recording through the HD500, because I'm usually working on video lessons or smaller projects where a quick and good basic tone is all that is needed. The fastest way for me to record is to plug my guitar into the HD500, the HD500 into Logic, and hit record. It's that simple. I have all my tones saved both on computer and in the HD500 itself, so I can load up my favourite tones in seconds. I even have my HD500 tones online for you to grab.
For recording projects where I want to try different guitar tones, and spend time mixing and testing things until I'm happy, then the Line 6 POD Studio UX1 + Pod Farm 2 solution is the best choice. It gives me the ultimate flexibility. It takes me a little longer to get set up with it (not much longer though) and it doesn't have the HD technology. Truth be told - in a song mix, I doubt anyone could easily tell an HD unit from Pod Farm 2 technology.
One more thing, all the great effects from Line 6 are of course available too. Sweet modulation, fat overdrive, delicious delays and reverbs, etc - it's all there with the Line 6 gear. I find the Line 6 effects are fantastic overall.
Lastly, the cost benefit of using any of the above mentioned Line 6 solutions is going to cost a lot less than buying dozens of vintage amps and killer stompboxes... even one great Marshall amp will cost more than the HD500, which has an insane amount of guitar tones in it, ranging anywhere from brutal metal tones, to clean country and jazz tones.
Differences between HD500 and POD Studio
Keep in mind that with the HD500, you can plug straight into an amp, the power section of an amp, into a PA, into a computer, or just use it with headphones. It's completely standalone that way. It has a looper built in as well, and it even has an effects loop, in case you want your favorite pedal in a certain position in the chain of effects. It comes with an expression pedal built in, and you can also add an extra expression pedal if you want to. Super flexible is the word.
The POD Studio is not standalone - you need a laptop or computer for it to function at all - that's important to realize. It is a device meant for recording, and it does this beautifully with an enormous flexibility due to the dry/wet scenario I described above.
So my recommendation is you decide on how you want to work, and then get the Line 6 POD Studio UX1 + Pod Farm 2 combo, or get the HD 500 unit. Either way, you will be able to record killer tones. I guarantee it.
The Proof Is In The Pudding
So they say. I have recorded dozens of videos with my HD500, and here are a few of them. You can decide for yourself how you like the tones.
BHC hockey song - check out my solo, that's the only thing I did on this tune. The rest of the recording was done by my friend Stefan in Sweden.
On this funky jam, I used the Marshall Super Lead model with gain cranked and a distortion stompbox model added for more gain.
One more thing! I almost forgot to mention - the HD 500 sounds I use for my recordings, they are all available online. Just go to line6.com/customtone/profile/dolphinstreet/ and download some of my patches I created. This means you can get the EXACT same patch I used for a guitar tone you heard on one of my videos. No need to tell you how I miced my amp, what tubes I used, etc - just download the patch, load it into your HD500 and voila - you have the same sound as me. Even if you think many of my sounds suck, you can search for certain tones and styles on the Line 6 Customtone website. There are tons of great guitar patches shared by the Line 6 community on Customtone.