DVD authoring from PC is a complex business.
To try an answer your questions:
1. You will need some form of editing software. You use this as the name suggests: For editing, chopping, changing and adding sound tracks to your video.
2. The MPEG encoder is another piece of software. This takes your edited footage and encodes it into an MPEG file. There are two ways to do this: If your editor has an MPEG encoder, then you should be able to encode your edited footage directly from the editor to MPEG. If you are using a standalone encoder (like TMPEG), then you will need to create audio/video files (AVI files) from your editing software and "feed" them into the encoder.
3. Authoring the DVD is where you bring all the elements together to write it to the DVD. That is, your video, your audio and any menu's and chapter links you wish to create on a DVD.
Depending on how much you want to spend, and how serious you are about this, you could have a look at the Pinnacle products. Some of these packages have "all-in". That is; Editor, Encoder and Authoring, for a reasonable price.
What I would recommend is the following:
Canopus DVRaptor-RT with Premiere 6.5. This package contains everything you will need, from vaideo capture, editing, encoding and authoring. This is a fantastic package and will serve both the enthuist and hobyist. Just make sure your PC can handle it. The best price I've seen it for on the net is at:
www.planetdv.net
Its where I bought mine and they are very good.
I personally do not like Pinnacle, but lots of people swear by them. Studio 7 is supposed to be quite good, and is cheaper than the Canopus package I mentioned above.
Visit both the
www.canopus.com and
www.pinnaclesys.com sites and have a look at their support forums for the products you are interested in. This will give you a very good idea of the kinds of successes and problems everydays users of the products are experiencing.
HTH
Martin
PS: The further down this road you go, the more questions you will have.