I've made a bucket lantern for the halloween week of the amusement park I work for. I will show you how it's done.
If you don't get the idea of the result, here's the video!
Step 1: Materials
-A steel bucket
-A marker of any kind
-A disc grinder
Step 2: Marking the Scary Face
Make sure you use straight lines, this is easiest to cut. I'ts no problem if you correct things (see the left eye), but if you use a permanent marker, make sure the outer lines are the ones to cut.
Step 3: Cutting
Don't cut to deep, it's not a problem if the shapes don't fall out immediately. Use a screwdriver and some gloves to remove them after cutting.
Step 4: Finishing Touch
Use a file or some sanding paper to smoothen the rough edges.
You can also paint the inside. Add a candle or lightbulb to create a nice effect at night. Be careful with fire, the bucket can get quite hot when using candles or big lightbulbs.