Once you install VLC and start the program you will notice the following window.
Click Media > Streaming…. to see the Open dialog wondow.
Select the file you want to play and click Stream.
Here you have the option to choose a subtitle file for your streaming. Once you are done the with your selection click Stream.
Now comes the following window.
In the Outputs section you have the option to choose between several different streaming methods. HTTP means stream by using the HTTP protocol. In the text box called Address you can specify the network interface used by the server. If you leave it empty, VLC will listen on all the network interfaces on port 8080. It is also a good idea to check the option Play localy in order to display the stream on your screen. This allows you to watch and control the stream you are actually streaming.
Now you have to select the Encapsulation method and the Audio/Video codecs. For encapsulation method choose MPEG-TS. Selection of audio and video codecs depends on the quality you want to achieve. Of course you can experiment and leave those codecs providing you with the best results but for now you can leave the default settings.
Time-To-Live ( TTL ) is the next thing you should pay attention to. This sets the numbers of routers your stream can go through. The default TTL value is set to 1, meaning that your stream won’t get accross any router. You may want to increase it if you want to route your stream over the Local area network or the Internet.
Now click the Stream button.
The next step is to go to another computer with VLC media player already installed. Then in the toolbar select Media > Advanced Open File …. Now in the “Open” window select the Network tab. From the drop down menu select the protocol which should be HTTP , enter the IP address and port of the streaming computer and click Play.
If everything is fine the file should start playing on the remote computer after few seconds.
VLC offers a web interface, which allows you to control the playback remotely. It could be activated by selecting Tools > Add Interface > Web Interface from the main window. Then on the remote computer open any web browser and enter http://<IP_of_your_server>:8080 (the same used to open the stream). The web browser will display all of the controls you need to manage the stream.
article source:http://pc-level.com/2009/06/how-to-stream-video-using-vlc-media-player/