I've been making time lapse movies for some time. I use a webcam and VideoVelocity demo program. If the sky has interesting clouds I run it all day and check the results. They are then edited into a movie using Windows Live Movie Maker. The webcam has to be set on fixed exposure to prevent it constantly re-adjusting. I set the program to capture an image every 5 seconds. Playback is 30 frames per second so the movie is 150x speed. The camera is out of a ground floor window so you'll occasionally see myself or the postman flashing past.
It's quite long so well done if you watch it all.
Jan Feb Movie from Stuart Wade on Vimeo.