I had the same question. I was going from a background audio recording service, and hoping to create a background video recording service. You can't truly record background video, but you can make the video preview very small in your existing UI. I followed the tutorial: http://integratingstuff.wordpress.com/2010/10/18/writing-code-that-captures-videos-on-android/ and the sample Camera Preview demo. But ultimately the sample code in http://www.apress.com/downloadable/download/sample/sample_id/39/ was simple enough to tweek, but also complete enough to work with setCamera. I will post my solution here to save others time in their progression from toy examples, to a complex example with good quality background video recording (using front facing camera if necessary).
This is the source for an Android video recorder with "no" preview (the preview is a 1x1 pixel which simulates an unobtrusive recording led), to record video without distracting users. To use your own UI, simply change the video_recorder.xml to your layout (be sure to keep the VideoView). It was tested on Android 2.2 and 3.0 devices.
Suitable use cases: 
- eye gaze tracking library to let users use eyes as a mouse to navigate a web page 
- use tablet camera(s) to replace video camera in lab/clinic experiments (psycholingusitics or speech pathology)
Layout xml:
    <?xml version="1.0" encoding="utf-8"?>
<!-- This file is /res/layout/video_recorder.xml based on listing 9-6 in Pro Android 2 -->
<LinearLayout xmlns:android="http://schemas.android.com/apk/res/android"
        android:orientation="vertical" android:layout_width="fill_parent"
        android:layout_height="fill_parent">
    <RelativeLayout android:layout_width="fill_parent"
        android:layout_height="fill_parent"
        android:gravity="center">
            <VideoView android:id="@+id/videoView" android:layout_width="1px"
                    android:layout_height="1px" />
    </RelativeLayout>
</LinearLayout>
Java class:
import java.io.File;
import android.app.Activity;
import android.hardware.Camera;
import android.media.MediaRecorder;
import android.os.Bundle;
import android.util.Log;
import android.view.MotionEvent;
import android.view.SurfaceHolder;
import android.widget.Toast;
import android.widget.VideoView;
/**
 * Android video recorder with "no" preview (the preview is a 1x1 pixel which
 * simulates an unobtrusive recording led). Based on Pro Android 2 2010 (Hashimi
 * et al) source code in Listing 9-6. 
 * 
 * Also demonstrates how to use the front-facing and back-facing cameras. 
 * A calling Intent can pass an Extra to use the front facing camera if available.
 * 
 * Suitable use cases: 
 * A: eye gaze tracking library to let users use eyes as a mouse to navigate a web page 
 * B: use tablet camera(s) to replace video camera in lab experiments
 * (psycholingusitics or other experiments)
 * 
 * Video is recording is controlled in two ways: 
 * 1. Video starts and stops with the activity 
 * 2. Video starts and stops on any touch
 * 
 * To control recording in other ways see the try blocks of the onTouchEvent
 * 
 * To incorporate into project add these features and permissions to
 * manifest.xml:
 * 
 * <uses-feature android:name="android.hardware.camera"/> 
 * <uses-feature android:name="android.hardware.camera.autofocus"/>
 * 
 * <uses-permission android:name="android.permission.WRITE_EXTERNAL_STORAGE" />
 * <uses-permission android:name="android.permission.CAMERA" /> 
 * <uses-permission android:name="android.permission.RECORD_AUDIO" />
 * 
 * Tested Date: October 2 2011 with manifest.xml 
 * <uses-sdk android:minSdkVersion="8" android:targetSdkVersion="11"/>
 */
public class VideoRecorderSubExperiment extends Activity implements
        SurfaceHolder.Callback {
    public static final String EXTRA_USE_FRONT_FACING_CAMERA ="frontcamera";
    private static final String OUTPUT_FILE = "/sdcard/videooutput";
    private static final String TAG = "RecordVideo";
    private Boolean mRecording = false;
    private Boolean mUseFrontFacingCamera = false;
    private VideoView mVideoView = null;
    private MediaRecorder mVideoRecorder = null;
    private Camera mCamera;
    @Override
    public void onCreate(Bundle savedInstanceState) {
        super.onCreate(savedInstanceState);
        setContentView(R.layout.video_recorder);
        mVideoView = (VideoView) this.findViewById(R.id.videoView);
        //mUseFrontFacingCamera = getIntent().getExtras().getBoolean(
        //      EXTRA_USE_FRONT_FACING_CAMERA, true);
        if(mUseFrontFacingCamera){
            // If caller wants to use front facing camera, then make sure the device has one...
            // Hard coded to only open front facing camera on Xoom (model MZ604)
            // For more universal solution try: 
            // http://stackoverflow.com/questions/2779002/how-to-open-front-camera-on-android-platform
            String deviceModel = android.os.Build.MODEL;
            if (deviceModel.contains("MZ604")) {
                mUseFrontFacingCamera = true;
            } else {
                Toast.makeText(
                        getApplicationContext(),
                        "The App isn't designed to use this Android's front facing camera.\n " +
                        "The device model is : " + deviceModel, Toast.LENGTH_LONG).show();
                mUseFrontFacingCamera = false;
            }
        }
        final SurfaceHolder holder = mVideoView.getHolder();
        holder.addCallback(this);
        holder.setType(SurfaceHolder.SURFACE_TYPE_PUSH_BUFFERS);
    }
    public boolean onTouchEvent(MotionEvent event) {
        // can use the xy of the touch to start and stop recording
        float positionX = event.getX();
        float positionY = event.getY();
        switch (event.getAction()) {
        case MotionEvent.ACTION_DOWN:
            // Screen is pressed for the first time
            break;
        case MotionEvent.ACTION_MOVE:
            // Screen is still pressed, float have been updated
            break;
        case MotionEvent.ACTION_UP:
            // Screen is not touched anymore
            if (mRecording) {
                // To stop recording attach this try block to another event listener,
                // button etc
                try {
                    stopRecording();
                } catch (Exception e) {
                    Log.e(TAG, e.toString());
                    e.printStackTrace();
                }
            } else {
                // To begin recording attach this try block to another event listener,
                // button etc
                try {
                    beginRecording(mVideoView.getHolder());
                } catch (Exception e) {
                    Log.e(TAG, e.toString());
                    e.printStackTrace();
                }
            }
            break;
        }
        return super.onTouchEvent(event);
    }
    @Override
    public void surfaceCreated(SurfaceHolder holder) {
        try {
            beginRecording(holder);
        } catch (Exception e) {
            Log.e(TAG, e.toString());
            e.printStackTrace();
        }
    }
    @Override
    public void surfaceDestroyed(SurfaceHolder holder) {
    }
    @Override
    public void surfaceChanged(SurfaceHolder holder, int format, int width,
            int height) {
        Log.v(TAG, "Width x Height = " + width + "x" + height);
    }
    private void stopRecording() throws Exception {
        mRecording = false;
        if (mVideoRecorder != null) {
            mVideoRecorder.stop();
            mVideoRecorder.release();
            mVideoRecorder = null;
        }
        if (mCamera != null) {
            mCamera.reconnect();
            mCamera.stopPreview();
            mCamera.release();
            mCamera = null;
        }
    }
    @Override
    protected void onDestroy() {
        try {
            stopRecording();
        } catch (Exception e) {
            Log.e(TAG, e.toString());
            e.printStackTrace();
        }
        super.onDestroy();
    }
    /**
     * Uses the surface defined in video_recorder.xml 
     * Tested using 
     * 2.2 (HTC Desire/Hero phone) -> Use all defaults works, records back facing camera with AMR_NB audio
     * 3.0 (Motorola Xoom tablet) -> Use all defaults doesn't work, works with these specs, might work with others
     * 
     * @param holder The surfaceholder from the videoview of the layout
     * @throws Exception
     */
    private void beginRecording(SurfaceHolder holder) throws Exception {
        if (mVideoRecorder != null) {
            mVideoRecorder.stop();
            mVideoRecorder.release();
            mVideoRecorder = null;
        }
        if (mCamera != null) {
            mCamera.reconnect();
            mCamera.stopPreview();
            mCamera.release();
            mCamera = null;
        }
        String uniqueOutFile = OUTPUT_FILE + System.currentTimeMillis() + ".3gp";
        File outFile = new File(uniqueOutFile);
        if (outFile.exists()) {
            outFile.delete();
        }
        try {
            if (mUseFrontFacingCamera) {
                //hard coded assuming 1 is the front facing camera
                mCamera = Camera.open(1);
            } else {
                mCamera = Camera.open();
            }
            // Camera setup is based on the API Camera Preview demo
            mCamera.setPreviewDisplay(holder);
            Camera.Parameters parameters = mCamera.getParameters();
            parameters.setPreviewSize(640, 480);
            mCamera.setParameters(parameters);
            mCamera.startPreview();
            mCamera.unlock();
            mVideoRecorder = new MediaRecorder();
            mVideoRecorder.setCamera(mCamera);
            // Media recorder setup is based on Listing 9-6, Hashimi et all 2010
            // values based on best practices and good quality, 
            // tested via upload to YouTube and played in QuickTime on Mac Snow Leopard
            mVideoRecorder.setVideoSource(MediaRecorder.VideoSource.CAMERA);
            mVideoRecorder.setAudioSource(MediaRecorder.AudioSource.MIC);
            mVideoRecorder.setOutputFormat(MediaRecorder.OutputFormat.THREE_GPP);// THREE_GPP
                                                                                                                                            // is big-endian,
                                                                                                                                            // storing and
                                                                                                                                            // transferring
                                                                                                                                            // the most
                                                                                                                                            // significant
                                                                                                                                            // bytes first.
                                                                                                                                            // MPEG_4 as another option
            mVideoRecorder.setVideoSize(640, 480);// YouTube recommended size: 320x240,
                                                                            // OpenGazer eye tracker: 640x480
                                                                            // YouTube HD: 1280x720
            mVideoRecorder.setVideoFrameRate(20); //might be auto-determined due to lighting
            mVideoRecorder.setVideoEncodingBitRate(3000000);// 3 megapixel, or the max of
                                                                                                // the camera
            mVideoRecorder.setVideoEncoder(MediaRecorder.VideoEncoder.H264);// MPEG_4_SP
                                                                                                                                // Simple Profile is
                                                                                                                                // for low bit
                                                                                                                                // rate and low
                                                                                                                                // resolution
                                                                                                                                // H264 is MPEG-4 Part 10 
                                                                                                                                //is commonly referred to
                                                                                                                                // as H.264 or AVC
            int sdk = android.os.Build.VERSION.SDK_INT;
            // Gingerbread and up can have wide band ie 16,000 hz recordings 
            // (Okay quality for human voice)
            if (sdk >= 10) {
                mVideoRecorder.setAudioEncoder(MediaRecorder.AudioEncoder.AMR_WB);
                mVideoRecorder.setAudioSamplingRate(16000);
            } else {
                // Other devices only have narrow band, ie 8,000 hz 
                // (Same quality as a phone call, not really good quality for any purpose. 
                // For human voice 8,000 hz means /f/ and /th/ are indistinguishable)
                mVideoRecorder.setAudioEncoder(MediaRecorder.AudioEncoder.AMR_NB);
            }
            mVideoRecorder.setMaxDuration(30000); // limit to 30 seconds
            mVideoRecorder.setPreviewDisplay(holder.getSurface());
            mVideoRecorder.setOutputFile(uniqueOutFile);
            mVideoRecorder.prepare();
            mVideoRecorder.start();
            mRecording = true;
        } catch (Exception e) {
            Log.e(TAG, e.toString());
            e.printStackTrace();
        }
    }
}