I'm with Jared on this one ...
>> My opinion: Usability labs are a senseless waste of glass and furniture.
>> http://www.uie.com/articles/streamlining_usability/

The linked article says it all, but in short:

-) A formal lab seriously freaks some users out, especially Type A finance folks
-) Same for webcams, though those are useful for documenting facial
reactions (grimacing, confusion, smiles, surprises)
-) Having the observers in the room makes everyone feel more
comfortable and connected. The end-of-test feedback session is a lot
more effective as a result
-) My usability lab fits in my pocket

If you really need to capture screen movements and audio, Morae and
UserVue tend to be the tools to use; you can usually spare a laptop or
other machine on which  to perform the tests. Otherwise, the most
stuff you need is a pad of paper, something to pay users with, and
stakeholders to observe and have their minds blown :-).

- Nasir
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