Note: I make yarn as I go along, so I only cut up one bag at a time. I find this is a little easier for me, as I don't have to keep track of a whole bunch of yarn at once, and it's slightly less tedious when you switch between cutting yarn and crocheting.
First, flatten your plastic bag as neatly as you can.
Keeping the bottom seam as flat, fold the bag vertically until it's maybe an inch wide, as shown in the second photo.
Snip off the bottom seam.
Cut the bag into strips anywhere from about .5 to 1 inch wide. This doesn't have to be perfect, and it doesnt' have to be consistent, so as long as the strips are thick enough to stay intact, and thin enough to work with, as in the third photo here.
Unfold the loops and connect them by using a girth hitch, described here
. Pull the previous loop taut before attaching the next, so the loops are evenly spaced.