Tim recently posted instructions on how to capture screenshots from an Android device. You can use the same underlying technology to capture video (albeit at 5 or 6 frames per second).
To do this, you'll need to download Mark Murphy's DroidEx, which is based on the DDMS debugging tool. DroidEx is available for download from this Google group, and also from GitHub. Before you go any further, though, be sure to check out Tim's answer and make sure you can get it to work. You will need all the software from Tim's answer to get any of the following to work.
Update: It doesn't look like DroidEx is available for download of either the above sources, so I've attached it to this Answer: DroidEx.zip (3.44K)
Number of downloads: 5005
Update 2: even better! Mark Murphy, the author of DroidEx, pointed out Jens Riboe's Droid@Screen, which works great for me.
If you downloaded the jar file from the Google Group, you'll have to run it from the command line with a command like this (make sure you've got your Android device connected via USB and have debugging enabled):
java -cp DroidEx.jar:$ANDROID_HOME/tools/lib/ddmlib.jar com.commonsware.droidex.DroidEx
You'll need to have set the ANDROID_HOME environment variable to the location of your Android SDK. For example, on my Mac, I set it with this command, which assumes android-sdk-mac is in my home directory:
If you downloaded the source code from GitHub, you'll need to build it with Ant (or you can download the jar file and drop it into the bin subdirectory). Read the instructions at the root of the source code and use the droidex shell script to run it.
Once you have it running, you'll get a window showing your Android screen, and it will update about 6 times a second. You can now use screen capture software (I use iShowUHD) to record the action.