I've digitized old VHS tapes using a video capture card and Windows Media Center (comes with the latest versions of Windows). These days you can get USB capture devices for around $30-$50. I hooked our old VCR player into the video inputs of my card and set up a manual recording on WMC. Quality was not that great, but the VHS tape quality sucked to begin with. From WMC you can burn video files to DVD, either as data files or as regular DVD; the latter can be played in any DVD player.
I've always wondered whether the people who offer conversion services have special dedicated equipment that can do better, but any recording is going to be limited by the quality of the original tape, unless they can do some kind of image processing to reduce noise or something. Even then, you don't get something for nothing ... that would change the quality in some other way.