Verified answer

Please excuse the other answerers, they have absolutely no clue what they are talking about.

Micing the amp is the traditional way to do it. An off-axis Shure SM57 is a huge part of the classic world-famous rock guitar sound. If your amp has an open back, you can put a second mic there (make sure to phase-reverse it on the desk though!) and blend it with the front mic for a fat sound. I did exactly this a week or two ago recording a Strat through a Big Muff into a Marshall hybrid amp, and it sounded epic.

However, there might be situations where the lineout option just works better for what you're trying to do. My friend who is also an engineer swears by this; I recommend you always track the lineout in addition to the mics. You can always throw away what you don't want later. :)

Record out jacks always sound awful. The speaker cabinet affects the sound in a pretty major way. Amp manufacturers primarily design amps to sound good through speaker cabs, not direct outs.

On the other hand, amp simulation software has gotten pretty impressive... often times it's indistinguishable from real amps. I saw this great article about a year ago where 5-6 top notch producers compared a bunch of amp sim plugins (Guitar Rig, Eleven, Amplitube) to the real thing. In quite a few cases they thought the sims sounded better than the real thing, and often couldn't distinguish which one was the real amp. I wish I could find it again, but no luck so far.

EDIT: FOUND IT!

http://emusician.com/tutorials/showdown-clubhouse-...

So yeah, mic'ing is definitely better than direct out, but is it better than recording a dry guitar signal and "faking" the amp? That's debatable.

You definitely want to run it straight. Only drums should be miced for recording :P It'll definitely help the final sound.

direct, no question