If you know jack about recording, buy a pod.

Recording nice sounding guitar with a mic is difficult for lots of reasons. I'm only going to touch on the tip of the iceberg here.... and remember a pod saves you form having to know all this and more.

Ultimately, some of the nicest sounds can be obtained using a mic however you have to A) know what you are doing B) have a place that is acoustically suitable and C) have the right kit.

Mics:
Dynamic is the opposite of Condenser. It means the mic doesn't need external power because it generates its own by making sound waves move a coil in a magnetic field (like a guitar pickup really).

Dynamic mics typically have fix directional input such as cardioid or hyper-cardioid response patterns which rejects sounds to the side and rear. A typical example would be a Shure SM57, which incidentally is the standard for recording live guitar.

As far as recording guitar goes mic position is critical. With a cardioid pattern mic comes a shift in tone as you move the mic off axis (to the side of the speaker). This is used to great effect when recording guitar and will give you a very different sound depending on the placement of the mic. Most people like a 57 pointed directly at the top right corner of a speaker directly on the cloth grill of there amp.

Live SM57s are great as the can handle a very high SPL (volume) with out the capsule blowing (unlike the more sensitive large diaphragm condensers). The also reject noise from other instruments near by due to their cardioid sensitivity pattern.

Remember most of the sound you hear is actually reflected sound not sound coming striate out of your amp and this is important and also reflects on the choice of omni (lots of ambient sound), cardioid (a bit of ambient sound) or uni (not much ambient sound depending on the direction of the mic. It also means the acoustic properties of the room you are in will drastically effect the sound you get.

In the studio people use two mic to great effect one on the amp (as describes above) and one 6 ft away, 6ft in the air for ambiance. Condensers are my first choice for this however they require phantom power to operate and that usually means a preamp.

The next impotent thing is compression. You will want a lot of this if you cont want your guitar to come and go relative to the bass and vocals.

Then comes a preamp for the mic (remember the output of a microphone is LoZ signal not line level.). The nicer the preamp and A/D converter (if you are recording digitally) thin nicer your finished result will sound.

Now you can double track to fatten up your sound ...

or get a pod !