Just gave VAC a look, super nice app and well worth the registration fee.
I lifted this image from the help file to clarify the functionality for those unfamiliar with this software:
From the manual:
"Virtual Audio Cable can be used to:
Connect two or more audio applications into a chain where each next application receives an audio signal produced by a previous application. For example, you can connect a player application to an audio processor and then connect a processor to an analyzer or a meter application to investigate the audio signal.
Intercept the digital audio signal from applications playing it to MME/Wave, DirectSound or WDM/KS Audio ports. For example, you can connect Real Audio Player to Audacity and record any portion of played sound in real time, without a quality loss. Or you can use it to route input and output signals to/from Skype from/to some recording/playback applications.
Record pure digital audio data produced by applications that don't create WAV files, sending audio only to MME/Wave, DirectSound or WDM/KS Audio device in real time.
Digitally mix several audio sources together and route resulting audio stream to a recording application, digitally distribute (share) an audio stream among several recording applications, convert audio data from one format to another in real time or bring a multi-client feature to any audio device that has not such feature."