>There are plenty of guides written by various people on this subject. Here is the easiest one that I have found.
Update: A better guide is available here
To add subtitles to a movie, you will require:
ffdshow or vobsub.
First download the subtitle for the movie from any of the following sites:
The downloaded subtitle should be in the .sub or .srt format. Rename the subtitle file to the same name as the video but with a .sub or .srt extension. For example, if the video is named video.avi the subtitle should be named video.sub or video.srt.
Now we will require a subtitle filter. You can use ffdshow or vobsub subtitle filter.
Using vobsub filter
Install vobsub and run the vobsub configure to change the subtitle settings.
Using ffdshow filter
Install ffdshow and run the ffdshow Configuration.
1. Select Subtitles in the menu to the left
2. Enable the subtitles.
3. Hit Ok.
The subtitles should now appear if you play the video with Media Player. If not then the subtitles may be in wrong format.
Converting to VCD,SVCD,DVD or AVI
1. Select Option>Environmental Settings
2. Select VFAPI Plugin
3. Right click on the Directshow Multimedia File Reader and select Higher Priority, repeat it until it is on the top of the list.
Open the video with wizard or manual. The subtitles should now appear. Use File>Preview in TMPGEnc to check that you can see the subtitles before encoding.
Now convert the video to the file format of your choice, .viz VCD, SVCD or DVD
Source: VideoHelp forum