How can I convert an existing computer into a virtual one?

Converting a physical computer into a virtual one is also known as p2v (physical to virtual).

GUI methods
The most obvious solution is to use VMware Converter. By using VMware Converter on a live system there are some risks involved and the state of the converted disk will be in a non-consistent state. It is possible to use VMware Converter from a LiveCD and then the success factor will be much higher and the converted disk will be in a consistent state.

For enterprise customers it's possible to download such a version of Converter directly from VMware here: http://vmware.com/download/download.do?downloadGroup=CONVERTER3

For those without enterprise licensing it's possible to build a CD that will work the same way as described here: http://sanbarrow.com/moa.html

VMware Converter is a windows application and the free version also only supports windows based targets. VMware Converter requires you to have at least 264MB ram in the source system, a requirement many old systems don't meet; so a manual method might still be required.

A manual alternative
An alternate method to do this is to do it the manual way. This method works fine as long as the physical disk controller is of similar type  as the virtual target. For linux it's however also easy to go from a physical ide to a virtual scsi, but on windows you will have to inject the correct driver in this process (fixvmscsi), while on linux you will only have to reinitialize grub. If you can use the same disk controller type on both ends, that would be the easiest solution.

Doing it manually can in fact be quicker than doing it with the GUI tools, atleast if you're converting a disk with a high fill rate.

1. Download SystemRescueCD: http://sysresccd.org/
2. Create a new virtual machine with a disk of the same size as the physical source disk
3. Boot both the source system and the target virtual machine with the SystemRescueCD.
4. In the target virtual machine, run the command: nc -l -p 5000|lzop -d|dd of=/dev/sda
5. In the physical source system, run the command: dd if=/dev/sda|pv|lzop -1|nc 192.168.1.5 5000
6. You can see the status of the transfer in the source systems console.
7. If it's a linux guest and it doesn't boot properly after transferring, you might have to reinitialize grub: http://www.gnu.org/software/grub/manual/html_node/Installing-GRUB-natively.html

This manual alternative can also be used to convert a VM to a physical server or between physical servers.

Note that PCs having Windows OEM licenses (typically on preinstalled PCs) will complain about activation if you try to move them and you will not be able to login to the system before it has been activated. Since  an OEM license is bound to the original hardware you will not be able to activate such a license on another system or in a virtual machine.