Check the "File" box under Outputs. Don't check the "Play locally" box unless you want to watch the movie as you are ripping it. Now select the encapsulation method. I would recommend ether MPEG1 or MP4 (if you want to put it on a device you have to use MP4 and with iTunes you have to use MOV.) Now select your video codec (I'd recommend Divx which is DIV1, DIV2, or DIV3 or MPEG which is mp1v, mp2v, or mp4v (if you want to use it on an iPod and/or with iTunes you have to use mp4v). Select your audio codec, you should always use MP3 unless what you want to use to play it requires another codec.
Update: I was wrong, if you want to use the file with itunes/ipod you need to save it as an mp4 with mp4v video and mp4a audio, not mp3 (that's just what I like to use since i don't use itunes for video).