How can I setup the Fretlight to play sound through my computer?

From Fretlight Knowledgebase

No sound transmits from the pickups through the Fretlight's USb cable. All the sound from the pickups go through the 1/4" jack, through the music cable like any other electric guitar. To input that into your computer, you can try 2 things:

1. If your sound card has an 1/8" input jack, buy a 1/4" to 1/8" adapter (at Radio Shack they're like $5 at the most) and try to capture it as you would a microphone. This most likely will not be the best quality, and you may not hear anything because the signal does require some amplification to be heard correctly. Some sound cards actually have this pre-amp built in. (it would probably say so in the specs) Your sound card MAY be able to handle it, but I'm thinking this is a long shot.

2. Buy a USB interface box that accepts 1/4" instrument cables. Suggestions would be the Line 6 Guitar Port or the M-Audio MobilePre USB Audio Interface.

In general, music creation is the only reason why someone would want to plug an electric guitar into a computer for sound purposes. Electric guitars, and their pickups, are designed for amps. If money is the issue, the M-Audio box goes for around $150, so you could probably pick up a cheaper amp from a local music store, but if space is the issue, the USB interface box is your best bet.