Some changes in the cryptocurrency mining space have rendered this guide outdated. I'm currently preparing a new guide using different software, for both AMD and Nvidia miners.
If you have spare AMD Radeon graphics cards lying around, and energy rates that aren't stratospheric, mining a peer-to-peer digital currency known as Litecoin (think of it as silver to Bitcoin's gold) is within your grasp. Earlier this week I published a hardware guide as a reference for miners new to the scene, but the following guide should get Windows users up to speed regardless of dedication level or investment level.
As I stressed in my hardware guide, it's imperative that you understand the difficulty level associated with mining. It brings an intensified meaning to the phrase "your mileage may vary." Even miners with the exact same hardware specifications can yield dramatically different results, so bring a healthy supply of patience and willingness to tinker.
This is by no means a comprehensive guide, but it'll get your toes in the pool. When you're ready to tackle the deep end, a great community exists at /r/LitecoinMining on Reddit, and there are helpful forums at www.litecointalk.org/. I'm sure that my readership will also gladly lend you an assist in the comment section here.
Understanding Pooled Mining
The first thing to accept about Litecoin mining is that doing it solo is a near-futile game. At its most basic level, earning Litecoins is accomplished by leveraging your GPU to process transactions across the Litecoin network. By doing so you contribute your processing power to helping solve "blocks." By design, the difficulty in finding these blocks ramps up over time, so it makes perfect sense to band together with other miners in an effort to speed up the hunt.
So pooled mining aggregates multiple software clients and users -- from several dozen to several thousand -- with the common goal of generating blocks. When one is found, the reward is split among the users who contributed based on their respective processing power. Pictured to the right is a glimpse at my stats dashboard at WeMineLTC.com, a fairly popular pool which finds blocks on average every 9 minutes. In this example, I've earned an estimated 0.0076 LTC (Litecoin) for my contribution in the current round. Those "unpaid shares" are paid out once all the transactions for a particular round are verified.
Here's an observation to illustrate the importance of pooled mining: It took 9.4 minutes to find the last block in our mining pool, but 31,742 software clients contributed to that. The old adage "if you can't beat 'em, join 'em" has never been truer.
Let's talk required software and accounts.
Litecoin Wallet: You'll need somewhere safe to store your Litecoins, so download the official Litecoin wallet at www.Litecoin.org. This allows you to deposit Litecoins as well as transfer them out to exchanges like BTC-e or to other users. Don't forget that your wallet isn't secured until you've encrypted it (Settings > Encrypt Wallet). And be diligent in constantly backing it up (File > Backup Wallet). If your hard drive crashes, you lose your Litecoins along with your data.
Pooled Mining Account: I'm a member of WeMineLTC.com, and I recommend it. You'll see references in some guides to Burnside's (ltc.kattare.com); please avoid it. During my research the site was down for four consecutive days. I've chosen WeMineLTC simply for its reliable uptime in my experience.
Stratum Proxy: Don't stress the technical jargon here. Stratum is just a more efficient method of mining, and this lightweight EXE file auto-connects you to the WeMineLTC pool. You'll need it regardless of the mining client you choose.
Reaper: This command-line executable is my Litecoin miner of choice, if only because I'm intimately familiar with it. It's a good balance between the simple but less configurable GUIMiner and the robust but more complicated CGminer.
GUIMiner-Scrypt: This is a user-friendly version of CGminer with a graphical front-end and an alternative to Reaper. It features a dropdown menu for pre-defined graphics card settings, though it doesn't yet have auto-configurations for AMD's Hawaii GPU (Radeon 290/290x). You can download it here, though this guide doesn't cover its usage.
Secure Router: Never plug any PC directly into your broadband modem, and never use a router without enabling a firewall. The nature of cryptocurrency means that hackers abound, so keep your mining operations safe from intruders.