It is not an uncommon situation where the only audio input interface to a computer is a microphone or a line input on a standard consumer grade sound card. While the modern day consumer grade sound cards actually have admirable performance specifications, the interfaces are designed for certain types of inputs. If the device plugged into the sound card is not designed to work with the interface, then you will get results that are characterized by noise, poor frequency response, or distortion. Most people will complain about how Rakarrack is noisy, or the guitar sounds bad. We have no software solution to defy the laws of physics.
However, we do have some recommendations to improve your hardware connections to minimize the problems associated with your sound card. Line in and Mic inputs will be discussed separately since they are somewhat different in the ways they interact with the input devices.
The shortened, non-technical advice about Line and Mic inputs is you can reduce noise significantly by plugging a device designed to receive the instrument and drive the Line or Mic input according to the way it is designed. For Line in, a preamp, a guitar with active electronics will work, a keyboard with a line out, or something similar are devices that act like the type of device the sound card expects.
Something with a headphones out is probably a bad idea but sometimes worth a try. Often a headphone output uses a small switching amplifier. The high frequency switching noise is filtered by your headphones, but may cause noise or a whine in your sound card. Headphone outputs that may work are those using normal linear amplifiers and have low output impedance.
Here is some more worthwhile reading about the topic:
http://www.musiconmypc.co.uk/art_record_guitar_on_pc.php
Line Input:
A line input presents two problems for a mono instrument with high output impedance (typical electric guitar). The first problem is the mono-to-stereo conversion. This can be easily overcome with an adapter that either shorts one of the unused channels (something like a Y-splitter), or feeds the mono signal equally to both stereo inputs. A splitter may be desirable because you can still use the unused channel for some other input such as a microphone. This is not a difficult challenge because most adapters will short the unused input by default. Avoid cheap adapters that don't default ground unused inputs.
The most notable problem presented by a Line Input is impedance matching. A typical Line Input has an input impedance of 10k-ohms. A guitar pickup typically has 5k-Ohms impedance, but with the volume pot, this can be up to 250k to 500k series resistance, depending on the value of the pot. This means with the volume pot wide open, the guitar signal received at the sound card will be 1/3 as loud. Move the volume pot only a small amount, and the sound will be almost inaudible.
Not mentioning the noise and poor frequency response problems, this presents an Analog/Digital conversion problem. In cheap sound cards, there is no analog programmable gain amplifier, so you have to do software amplification. Not using the audio card's full scale resolution is tantamount to having a soundcard with lower resolution.
Take a 16-bit sound card, for example. First, the guitar only puts out 1V max peak for hot pickups, but the average guitar pickup gives perhaps 1/5 of that most of the time. Take 16 bits = 96dB dynamic range. Take away 14 dB (~1/5) for guitar signal raw power compared to expected line level input, then take away 9.54dB (~1/3) for loss on input impedance, and now you have a dynamic range of 72dB. This means you have reduced your 16-bit sound card down to a 12-bit sound card simply by not using the full input signal range.
If you back your volume knob to 1/2 way, this creates a series resistance of about 250k, and the division on the input is even worse. Backing the volume knob to 1/2 reduces your sound card to the equivalent of an 8-bit sound card, which is the grade of electronics you would find in a cheap toy.
Higher quality sound cards have a programmable gain analog amplifier to boost the signal before it goes to the A/D converter. In this case, the built-in amplifier boosts the signal up where it can use the full resolution, but it also amplifies the noise on the line by the same amount. In this case the signal/noise ratio is reduced by ~22dB (using example above), and you still have a non-optimal condition. (As a side note, this is the same problem when plugging a guitar directly into a mixer board without a preamp--fortunately pro-quality mixer boards typically have less input amplification noise so you can often get away with using a passive direct box).
Not only do you have problems as indicated above, but the low impedance loading on a guitar pickup is a problem. Most guitar pickups have a poor frequency response when loaded to less than 47k-Ohms impedance. Even worse, because of the electro-mechanical properties governing how guitar pickups work, a low impedance load performs the equivalent of an electromechanical brake, similar to what train engines use to stop the train. The sound card input burns off the energy in your guitar strings in the form of heat (not dangerous for the sound card since this is low level energy). More plainly, your sound card input is causing the guitar pickup to act as a magnetic brake on the guitar strings. You will play a chord and it will appear to damp more quickly. The singing sustain you get from your guitar amp is gone--not because the guitar amp is magical--but because the low impedance sound card electrical load is burning the energy out of your guitar strings while the guitar amp input impedance is designed to work well with most guitar pickups.
The solution?
Here are a few:
Get or make a preamplifier that has a high input impedance for your guitar and a low impedance line-driver output. Sometimes these are marketed as "line driver" or "active direct box".
Purchase a sound card with inputs designed for your instrument or microphone type. Behringer seems to be the low cost solution. They have such an audio interface for something near $40USD intended for use with guitar:
http://www.behringer.com/EN/Products/UCG102.aspx
These are well supported under Linux. If that cost is more than you can spare, and you don't happen to have any other kind of preamp device laying around, then you will simply have to plug direct to the line input or mic input and understand it could be better.
Microphone Input:
Many of the same issues apply to this interface as to Line In, but there is one more caveat with the Mic inputs. A typical PC microphone is a device with an active amplifier built-in, and this device expects to be powered by the computer. The microphone input from a PC provides a bias voltage, and it is designed to expect a certain electrical load to be applied. Most of the time the guitar loads this input enough to work, but in some cheap sound cards, you get DC offset (which can wreck some of your presets). In all cases, the mic input is generally lower quality and higher noise, no matter what you do. Here is a page with some good ideas for somebody with willingness to try a hand at simple electronics:
http://www.epanorama.net/circuits/line_to_mic.html
Something similar could be achieved with a 50k volume pot turned most of the way down so the one end has a low ~100-ohm impedance to ground, and the guitar gets most of the 50k in series.
The pickup loading and string braking as explained for Line Input is generally not a problem because you usually have to turn the volume knob back to attenuate the signal level to the low level expected by the mic input. The resistance of the volume pot in this case is put in series with the pickup and thus loads the guitar adequately.
Regarding DC-offset: DC offset is a constant value other than zero when the instrument is silent. This will mess up some Rakarrack presets if left active on the line going into Rakarrack. We have provided a solution to this problem. In Settings->Preferences->Audio, put a check next to Filter Input DC Offset, and Rakarrack will take this out of the signal before doing normal processing. It is an option you may enable/disable as needed because it is a waste of CPU usage if you have a good audio input that doesn't put DC into the system, and also is somewhat bandlimiting (the cut-off is -3dB at 20Hz, but above the cut-off a filter has some effect -- up to -3dB. Above 50Hz, the band-limiting effect is negligible for audio purposes).
The Conclusion
The hardware configurations are listed from best to worse below:
1) Buy a high quality hardware digital audio interface that is designed for your instrument.
2) Use Line Input with a good quality preamp that is designed for your instrument. Boost the input level to use full resolution (VU bars on Rakarrack in the yellow).
3) Use Microphone input with some impedance matching circuitry to reduce noise and tame signal levels.
4) Use Microphone input level direct with guitar and adjust volume knob to get the optimal sound. Use DC removal in Rakarrack. Understand that noise and poor quality sound is due to your hardware configuration, and it is probably not caused by Rakarrack.
5) Use Line In directly, but understand noise and poor quality sound is due to your hardware configuration, and it is probably not caused by Rakarrack.
If you have a guitar with a built-in preamp (active electronics), then plug directly into the sound card Line Input and all is dandy.