It's really easy to make excellent yogurt at home! This recipe can be scaled up or down, and makes delicious vanilla (or plain) yogurt.

Ingredients

1/2 gallon milk (I really prefer 2% or whole milk, for a thicker yogurt.)
1 cup sugar (optional)
1 Tbsp vanilla extract (optional)
1 6-8 oz package plain store-bought yogurt (must read "contains active cultures")

You'll also need:

Canning jars or other containers
A thermometer
A heat source (for incubating the yogurt)

*Note: If you just want to make plain yogurt, skip the sugar and vanilla extract, and just use the milk. This is the only way I make yogurt now! I prefer adding my flavorings in the form of whole fruit, granola, etc.

Step 1: Heat the Milk

Heat milk to 180 degrees, and add the sugar. Stir until it's completely dissolved.

If you want plain yogurt, skip the sugar but still heat the milk.

Step 2: Cool It Down.

Cover and cool your sweet milk down to 115 degrees F. In the meantime, sanitize your containers. I use One Step no-rinse sanitizer, which is available at most homebrew supply shops. Alternatively, you could rinse them with boiling water, or run them through the heat-dry cycle of your dishwasher.

Once the milk has cooled to 115 degrees, add the vanilla extract and your purchased yogurt, stirring it in well with a sanitized spoon or rubber spatula. It's crucial that you maintain sanitation at all points in this process!

Again, for plain yogurt, skip the vanilla.

Step 3: Fill Your Jars

Now pour the mixture into your sanitized jars. I use quart jars, and ladle the mix in with a liquid measuring cup. Set aside a small container to use as a starter for your next batch. This will allow you to skip buying the store-bought yogurt next time, as long as you keep your sanitation up! Screw the lids down tightly.

Step 4: Incubate

Incubate the yogurt at 110-115 degrees F for the next 6-8 hours, up to 12 hours for a tarter flavor. I've found that my heating pad inside a cooler maintains this temp perfectly. However, most heating pads will have an automatic shut-off, so you'll have to babysit it a bit. Pack any dead air space in your cooler with wadded up towels for better insulation. My long probe thermometer is resting right against the side of one of the jars.

You could also try setting them in the oven, if you can set the heat that low. If you're just itching to spend lots of money, you could buy a commercial yogurt maker, which I believe maintains a constant temp as your jars incubate in a water bath. I prefer my free setup, using common household items.

That's it! Refrigerate the yogurt and it should keep for at least a month or two. You'll notice that the curd separates out from the whey after it sits awhile, so give it a stir and you're good to go. This makes a great base yogurt to blend with fruit, granola, etc. It's also good over cereal in the morning, or whipped up as kind of a yogurt drink.

Finally, you can pour the finished yogurt into a strainer lined with cheesecloth and let it hang for several hours to make a "yogurt cheese" that is much like cream cheese. You can make the plain version of this yogurt and then add any sort of flavorings to the finished cheese for a fancy spread.
Let me know what you think!