My first youtube videos were made with my camera's on-board stereo microphone. The camera is a Lumix GH1, and the mics are fairly good as far as prosumer video DSLR cameras go. One problem is that the camera's automatic gain control cannot be turned off, and having unexpected gain changes during an audio recording is not preferable. Another problem is that the audio preamplifiers in the camera are somewhat noisy, and lead to a lot of hiss (high noise floor) in the recording. Finally, it's impossible to get good sound when the microphone is positioned far away from the sound source when room tone and echoes are present. The solution to all of these problems is to make use of a lavalier or lapel microphone and use a low-noise dedicated recording device. I use a Zoom Handy H4 recorder. The H4's on-board mics are really nice, but it is still preferable to have a microphone very close to the subject's mouth to capture detailed, high-quality sound.
I started using an Audio Technica ATR-3350, which is only $20 or $30 new, and the mic is OK, but has very little high-frequency response. This can be corrected with equalizer settings in post-production fairly well. I recently upgraded to a Sony ECM-55B, which sounds better, but I am not sure it was worth the expense. I was really expecting the mic to have a much higher output level than the ATR-3350, thus allowing me to turn down the gain on my recorder and have a much lower noise floor. As it happens, the mic requires even more gain than the ATR-3350. Overall, I am pretty satisfied with my sound recording setup -- the only addition I might make is a low-noise preamp to try boosting the lavalier mic signal while adding less noise than the H4 adds during the high pre-amp gain stage.