It sends all the audio output flow to a virtual audio input device that you can record with GarageBand (when enabled, no sound is made by your standard audio output device).
It is free and it works well on my Intel Leopard.
However, I don't think you can select the application(s) that you want to "hear" and record (I have never had this need before...).
In this case, I would recommend you to use Audio Hijack as puckhead said, but I thought it was not fully free...
No "white noise" added for long records if you don't register?