You can conceivably plug your guitar/keyboard/mic directly into the 1/8" microphone jack on your PC, but you'll have latency issues.
http://en.wikipedia.org/wiki/Latency_(engineering)
What I'd recommend, is getting an interface. USB, or preferably a Fire Wire (low latency).
Audio Interfaces | Sweetwater.com
You'll be able to plug your gear into it, and then to your PC, and record what ever you'd need. Basically what an interface does, is that it will take the analog signal, and convert it into a digital signal (essentially).
As far as a DAW (Digital Audio Workstation), Reaper is a good choice as far as I've heard, but I use Audacity (Free/Opensource). But here's a good list of available ones out there (scroll down a bit in the link):
Digital audio workstation - Wikipedia, the free encyclopedia
Hope it helps.