I used this tutorial this tutorial to learn to bind books this way. It's very thorough, so I won't repeat it's instructions, but basically you sew the binding in a particular way with the twine and needle. Make sure it's very tight and secure. That's it!
This is by far the simplest and the best recycled paper notebook I've made. I already made 3 of these. Leftover corrugated cardboard for the covers makes for a decently hard surface.
Now I know what I can do with all that "wasted" paper! I made half dozen or so and gave them to some folk at the office... They think they are great and use them for all sorts of notes, lists, and maybe a little doodling.
Nice "How to" very well done. Juste a line to say you can do some nice binding with recycle stuff. I've made some with wood crates like here: Bookbinding
(it's only in german - but i think the pictures are meaningful)
Bookbinding