There are two possible causes:
The one which is probably least likely is that your computer has insufficient RAM. That results in memory being borrowed from the hard drive, which isn't fast enough for video streaming. (You can tell that it's happening because you'll see disk activity whenever buffering occurs). To fix it you ideally need to increase the amount of RAM in your computer but simply disabling all unnecessary programs can also help. (To see which programs automatically run as soon as you start your computer, go to Start > Run and type 'msconfig' into the box. Then click on the 'Startup' tab. If there are programs you don't need, click to remove the ticks, click 'Apply' and 'OK'. Restart your computer and read advisory the message that appears. Then put a tick where it says 'Do not show this message again').
However by far the most common cause of buffering is insufficient bandwidth. Check your download speed here:
http://www.bbc.co.uk/iplayer/diagnostics
The table which appears underneath your results indicates which BBC streaming services your connection can handle. For reliable Youtube downloading you should be seeking a figure of at least 2000kbps (but I'd prefer to see at least double that figure).
If you only get low figures, do the following:
(a) if your router is connected via a telephone extension lead, try connecting directly to a main phone socket ;
(b) if your PC is connected to your router wirelessly, try connecting it with an ethernet cable;
(c) if (b) produces increased speeds, but you really need to use a wireless connection, try to bring the router and PC closer together, while keeping both of them as far away as possible from cause of interference, such as your printer or TV. Also try changing the channel used by your router.
If none of those help, you need to speak to your ISP. Most ISPs only provide an ADSL service, whereas most exchanges can support ADSL2+. (That effectively gives you two lines connected together, doubling your download speed). If you threaten to find another ISP you might get your service upgraded free of charge. (I did!).
Remember, as well, that 'budget' ISPs often have lousy contention ratios. (That's the number of people that you share a connection with). Many are around 50 to 1 (or worse). Try checking your connection speed at, say, 4am. If it's a lot better than at, say, 7pm, then your ISP has a poor contention ratio and you should seek a better one. (My ISP has a 7 to 1 contention ratio, or better, but I pay 'business prices' for the privilege).
Chris