Joel recommends Camtasia Studio for online demos:
One product I just can’t stop singing the praises of is Camtasia Studio,
by the folks at TechSmith in Okemos, Michigan. It lets you "film" your
computer screen, all in software of course, then edit the film, add
narration, then squeeze it down to a very compact flash movie you can
put on the web. This is a beautiful piece of software. It does exactly
what you need, works the first time, and comes with great documentation
you’ll never need.