How to record audio from your sound with Audacity:

• Install Audacity
  
  Code:

  sudo apt-get install audacity

• Run Audacity
• In the drop-down menu of the mixer toolbar, choose "Wave Out" or "Stereo Mix" as the input source (The exact name may be different, depending on sound drivers of your computer)
• Press the "Record" button to start recording sound playing on your computer speakers.

If this doesn't work on your computer, I do not recommend you to use a cable connecting the "Line Out" (speaker) of your sound card with the "Line In" and record record from the "Line In" due to the low quality of such recordings. Try to use the PulseAudio Volume Control instead:
How to solve the Audacity recording problem in Ubuntu 9.10 Karmic Koala (No "Wave Out" or "Stereo Mix")