How do I go about setting up my own private chat room?

I would like to set up a chat room so friends and family could join a group discussion, preferably using a video link too. I know YM has a conference facility but i was wanting something independant. Is this possible using my PC as a server or would I need to buy a domain and rent webspace. Any expert guidance would be appreciated.

To set-up a chat room is easy in terms of coding, using PhP and MySQL.
To run it is another matter, especially if you want video facility: you must have a server with a HIGH BANDWIDTH (at least 20Mb/s): this is where the costs rise.
If you are on ADSL, even with 2Mb/s download bandwidth, your UPLOAD bandwidth (the one you need to SERVE your visitors), is probably about 120kb/s, way below what you need: 128kb/s is the minimum to stream video to ONE client!
(10 people on-line at the same time require 1.28Mb/s bandwidth...)
Buy a domain, rent a server with HIGH bandwidth in/out is the way forward, but it will be costly (not talking about the price of the coding)

Go to Bravenet.com, I'm sure you will find what you want there.

You could set up an IRC server on your own computer using something like UnrealIRCd, but it's difficult, you'll leave yourself wide open to attacks, and if you have a router chances are people will have a hard time connecting unless you open some ports.

Whats wrong with Windows Live Messenger?