If you haven't already, download iSpy and run the executable ("setup.exe"). You will need Administrator permissions to install iSpy but you won't need them to run iSpy after install. The download is about 15mb and will take about 40 seconds on an ADSL connection.
This is required to run iSpy. The iSpy installer will automatically install this on your computer if needed.
VLC is an enormous open source project that supports virtually any video and audio source known to man. iSpy uses an open source library (called nVLC) which enables iSpy to connect to video and audio sources using VLCs extensive capabilities. Using VLC iSpy can connect to MP4, ASF streams, RTSP streams and many many others. Download VLC from videolan.org. VLC isn't required to run iSpy.