Due to the costs involved most VHS cassettes go to landfill. The plastic cases can and sometimes are recycled as are the bits of metal inside. The tape is the tricky bit and as the prevoious poster suggests some people knit bags and things out of the stuff but mostly it's just a waste product.
Did some research myself over this subject and discovered only a few places in the UK that took tapes and usually you paid them to take the tapes.This is one of them
The Recycling People
Unit 1 Wolf Business Park
Alton Road
Ross-on-Wye
Herefordshire
HR9 5NB
There is a charge for this service (�5.85 for up to 50 pieces).