In order to record audio from the iPhone Simulator you will need to install the Soundflower audio extension. This is an open source project, released under the GPLv2. It was created by Cycling '74 and currently maintained by Tim Place of Cycling '74 and Electrotap. It can be downloaded from here (or directly through this link).
Soundflower allows audio from one application — in this case, the iPhone Simulator — to be routed to another — SimCap.
The Soundflower disk image includes a package installer which will install the Soundflower extension. You will be asked for your password. After installation, the plug-in will be active and ready to record.
If, after installing Soundflower, you decide you no longer wish to use it, it can be removed by simply running the uninstall scrip included on the disk image. You will need to restart your Mac to complete the process.
Once SimCap has found the Soundflower extension, you will be able to select the "Record Simulator Audio" checkbox in the main control window.
Due to a recent change in the way the iPhone Simulator handles changes to your Mac's default audio route, SimCap is no longer able to seamlessly switch to and from recording with Soundflower. The Simulator now requires a restart after Soundflower is selected before it will output to it. In place of the automatic setting, SimCap now offers a button to enable and disable Soundflower, along with a message (which can be disabled) reminding you to restart the Simulator. This is less than perfect, we know, but it's the best we can do under the circumstances.
Before recording Simulator audio for the first time, check the sound levels for the Soundflower audio device. To do this, go into System Preferences and select the Sound control panel (shown below).
You will find two new audio devices listed: "Soundflower (2ch)" and "Soundflower (16ch)". By default, SimCap uses the "Soundflower (2ch)" version, although you can change this via the Preferences (see below). You will want to adjust the device volume on both the "Input" and "Output" tabs. Be warned that by default audio is played from Soundflower at maximum volume, so if you don't change the output volume setting any voice-over you try to record at the same time as Simulator audio is likely to be drowned-out.
How SimCap behaves when you attempt to record Simulator audio is controller via the application Preferences (shown below).
You may choose which of the Soundflower devices to use for recording system audio. In most cases, the default 2 Channel device should suffice.
Please note that while recording you will not be able to hear Simulator audio since it is being routed away from your normal output device.
Some users of SimCap have reported issues with Simulator audio quality — typically, stuttering and unwanted reverb. These symptoms are typically caused by Soundflower having access to insufficient cache memory. This can be fixed by running the Soundflowerbed.app — which you will find installed in /Applications/Soundflower/ — and selecting a larger size from the "Buffer Size" menu for your chosen (2 or 16 Channel) device.