My back yard has a slope down towards the house and during the monsoon water often sits against the side of the house and seeps underneath. To fix that, and to create a couple of flat areas and a garden, I decided to put up a couple of retaining walls (and a French drain against my house). Local restrictions vary but I understand it is fairly common for most towns in the US to allow you to build a retailing wall up to 48 inches high without a permit (it would be a good idea to ask at your local planning department)
After reviewing the costs of various methods of retaining soil I decided to use railway ties (Sleepers for the rest of the world). I know ties are full of nasty preservatives but most of the negative health issues (like liver, kidney and respiratory tract problems, cancer and death) come from eating it, swimming in it or breathing in it's fumes (esp. when it is destroyed or burnt) so, if we are careful not to eat any dirt around the ties and don't lick them we should be fine. Our friends at the CDC have lots of info. In this area (New Mexico) ties are very cheap so try your best not to judge me too harshly. If you look around you should be able to find "landscaping ties" for a higher price that aren't as toxic. Or you can dig yourself a sawpit and cut your own.
Anyway, let's assume you have a bunch of railway tie-looking timber and want to make a retaining wall with them. Read on...

Step 1: Materials

Railway ties (to make the wall out of, your planning step will result in an approximate quantity, if it isn't easy to go and get some more ties you might want to add a couple more)
Scrap 2x4 (for the temporary post braces, 6x 48 inch pieces should do the job or just two if you want to go slowly)
Scrap wood stakes (to anchor the temporary post braces)
Concrete (I use 80# premix bags, one or two for each post)

Pick & Shovel (or a way to dig)
Wheelbarrow (or other method of moving dirt & mixing cement)
Level (I use a 4 ft one, ties aren't straight so the longer the better)

3/8" rebar (reinforcing rod) to pin the ties together and the means to make a 3/8" diameter hole about 16" deep.

Step 2: Planning / Layout

My opinion right now (I'm sure to look back at this and wonder what I was thinking) is that as long as I am healthy enough to swing a pick, I'd be crazy to hire any kind of heavy equipment to build a little wall. In light of this it is a very good idea to spend a bit of time planning what you are about to do. Don't over do it though, I found that during the digging process (which, for me was a year long ordeal) I would spend plenty of time "reviewing the layout", and trying to get my breath back (we live at 7000ft (2100m), I hope that is a good enough excuse).
In my case the layout was fairly straight forward. I was making a straight wall so I just needed to consider the length of each tie and stick in a stake a couple of feet outside each end.

Step 3: Dig

At this point it becomes hard to put off the digging. If you're a logical person you'll have hired some heavy equipment or some students and can probably skip this. There's not much advice to give you except that I try my best to get all the dirt I can to the up-side at this point (then the backfilling step is a breeze and you get all the hard work over and done with). I aimed to dig 2-3 inches more than I needed to so I had a bit of room to drop in and maneuver the horizontal ties at the end.

Sorry, No pic's of this stage (even thought the digging took months).

Step 4: Dig Post Holes

When you have a nice level space where the wall is to go (it needs to be close to level, unless you want the horizontal ties to be not quite horizontal) you get one last chance to decide exactly where the wall will go. When you are certain go and re-measure the tie thickness. My ties are rectangular in section and I use the longer dimension vertically, it is the shortest dimension that you need right now. Go back to your hole and measure out from the dirt wall that you currently have (I add an inch or two just to be safe) and this will give you the side of the post that will be in contact with the horizontal ties. During the planning step you hopefully have worked out the distance between posts so you now should have the position of each post. I planned to have the joins between horizontal ties behind a post and the ties were 9' long so the posts were 9' apart. Mark the size of the post plus 4 inches or so with a spade and start digging. With any luck your soil will be a little softer than mine so it won't take you too long to get an 18-24 inch post hole. The depth is the most important part of this project, and I can't really give you any advise because the amount of stress the soil can take is a function of your geology. I went to 24" in very hard soil and added a couple of deadman anchors later just in case (after a year I think the deadmen were overkill but better to be sure).

Step 5: Set Posts

This step defines how your wall will look so take some time to make sure everything is plumb.
Choose the tie you'll use for the post and cut it to size. I always put the cut end down so that the tops look uniform (and it may protect the wood when snow and rain sit there since the ends are usually well sealed) . Drop one in each hole and drive in some sturdy stakes 3 ft from each post in different directions. Then get some 4ft scraps of 2x4 and screw a piece to each stake and the post. Now your posts should be braced in two directions and be fairly solid. (Tip: remember, you'll need to get the cement to the hole so don't block an easy access with a brace). Now (unless you have a helper) you'll probably have to unscrew one brace and plumb the tie in that direction, screw it in again and repeat with the other brace. Once you've got everything pretty, and have looked down the line of posts to check that they're all the same (if you're going to mess something up at least do it to them all so you can make up a reason later and not look so bad).

Step 6: Pour Concrete

If you've got some skill in this area (not that it takes much) you could mix your concrete properly with sand, gravel, cement, and water. Playing with cement is not my favorite thing so I buy 80 pound bags of pre-mix to speed up the process and after mixing in a wheelbarrow (with as little water as possible (too much water weakens the concrete)) I pour it straight into the holes. My holes took two 80 pound bags each to fill up to the top, but they ended up a bit bigger than I'd have liked. Leave the braces in place for a couple of days then take them off. The concrete should be cured enough to take a bit of a hit but ties are heavy so when I put the horizontal ties in place I was careful not to drop them against the verticals.

Step 7: Lay First Row

Now that I look at my finished wall and compare it to the sketch I see that I had my verticals a bit closer together than 9' since the horizontal ends were flush with the outside of the outer verticals (not like in the sketch).
Ties are not perfect creatures, they are wobbly, curvy, bent, and just not that straight. Therefore it's worth making the bottom row Very level, even if you have to remove the tie and dig a bit more out or tamp down a high spot; any wierdness now may be amplified by the time you get to the top of the wall.
At this point its time to pin the row in place. This (combined with the other rebar pins I added in subsequent rows) probably adds some shear strength to the wall (not that it will have much shear stress on it but you never know how soil will shift over the years). I used three pieces of 3/8" rebar per tie and embedded them about 12" into the ground. The shear strength reason is not why I add the pins, I'll tell you in the next step.

Step 8: Lay Other Rows

Once the first row is in place it would be nice to just throw on the remaining ties and call it good. Unfortunately the previously mentioned lack of perfection in ties means that every one has to be placed on the wall to check if it sits well and, if it does, pinned in place with 3/8" rebar. Now for the real reason I used the rebar pins:
Did I mention that ties aren't perfect? Mine tended to be not square (see the second pic. below) with splitting on the back side that I wanted to hide. With the rebar pins I was able to hold them in place (eventually the backfill holds them there). Each pin was 16" or so long and reached through the tie almost all the way to the bottom of the one below it. I put three pins in each tie.

Step 9: Deadman / Deadmen?

It's been a year since I finished my first wall and I'm not sure if the deadman anchors were needed or not. I'll let you decide; this is what I did:
I knew I was bracing each end of the wall with ties so they would be strong and since my wall had four vertical posts I decided to put a deadman at the two unbraced posts.
I got a 6' T-post (also called a Y-post, Star Post or Waratah) and cut it in half. I then drove them in at a slight angle away from the wall to 6-10" below the final ground level. I wrapped the wire rope where it needed to be and got a wire rope clamps on the joint but not tight. Then I set up a comealong (hand operated ratchet lever winch) to pull the post and deadman together. When I thought there was enough tension I pulled the wire rope as tight as I could by hand and tighten up the clamp. When I released the comealong the tension was put on the wire rope. All looked good so I added a backup clamp to the rope and repeated with the other one.

Step 10: Brace

The ends of the wall needed bracing so I used up some shorter bits of tie and stacked them (with rebar pins) outside the outer post and pinned the brace to the post near the top. you can see that, because of the lay of the land and surrounding structures, I put one brace in each direction. I don't think either way is better as long as the top-most part of the brace is attached to the post and the part of the brace that is furtherest from the wall has a good anchor (I used 1" galvanized iron pipes about 18" long driven in the same way as the rebar pins).

Step 11: Backfill

Nearly there, just a little more labor. On this wall I stapled some landscaping fabric to the back of the wall to allow water but stop silt from coming through. On subsequent walls I just used some thick poly plastic sheeting that I had (I don't think that enough water could build up to push the wall over).
Since I had the soil in a pile and was going to make the area into a garden I took the chance to mix in some manure while I was backfilling. This seemed to have worked well because my poor clay and silt soil has grown a lot of squash this year.
After it was all done I put a French drain on the down side of the wall and bought a load of gravel in. The area, which was boggy throughout the monsoon now stays dry all year.