Basically, the AIW cards and quite a few others do NOT have an onboard specialized processor that does nothing but encode analog video. This is fine for viewing TV on your computer, but when you want to capture video to your HD, your processor (which is not specialized or optimized for the task) has to do all the work, and it has to do it RIGHT NOW, or else the video is lost for that frame. Lots of things can affect the quality of the resultant encoded video, including how dynamic the footage is (PBS or Terminator?), how peppy your proc is, and what quality settings you are using for the capture. This can result in artifacting, choppiness, dropped frames, etc. A lot is dependent on your hardware and how easy you are to please on the project.
The other products I mentioned can do hardware encoding. They do have an onboard, highly specialized processor on the card (or box for the USB versions) that does nothing but use built-in algorithms to convert analog video signals to ones and zero's. The file appears on your computer already encoded in the format you selected, and you can use your computer to surf or whatever in the meantime.
Still other products, like my DV cam with the analog-digital passthrough, or products from ADS and Pinnacle, only encode the analog video to DV. DV is (for our intents and purposes) uncompressed and huge as you probably know. The advantage is that the quality level is very high, and the material is the easiest to edit and work with in a NLE (non linear editing) program. After editing, etc., just like your home movies, you would then have to use an encoder to get it to the more compact and friendly file format of your choice (mpeg2, divx, etc.). This is software encoding again, but not in realtime! The computer can take all the time it wants to examine the DV file, make multiple passes, apply filters, whatever you want it to do. With this method, how peppy your proc is just affects the time it takes, not the quality of the result. Ultimately you have the most control over the process and yield the best results in your final video with this method.
Capturing old VHS to digital though, usually the quality of the original isn't that great to begin with, so dialing down the settings saves time and usually can't be noticed. You might be able to get away with software capturing, but IMHO, just get a USB or PCI hardware capture card. They can yield very nice results, and while not as cheap as the non-hardware capture cards, they are easily less expensive than the AIW's you were looking at. They also often have some of the same nifty features like Divx encoding, PVR functions, remote controls, or TV Tuners!