"Gallon Batch of Delicious Homemade Fat Free Yogurt from Recycled/Reusable Items;" seems superfluous. This is my first instructable, and I know this topic is covered every-so-often; but this is how I manage to impress my wife and kid every time.
I'm making a bit more than a gallon of yogurt here, starting with a gallon of skim milk and adding ingredients. I like my yogurt soft and just tangy enough, as we like to put it on cereal as well as make smoothies. Making yogurt is incredibly easy, but the results are generally outstanding. You can experiment and find the exact amount of tanginess you prefer and make the most delicious yogurts over and over specifically tailored to you and your family. You can have a lot of fun doing this and it's simply delicious.
Yogurt has been in use by humanity for more than 4,500 years. That is nearly as long as we've been brewing beer, and the two processes are not dissimilar.
In the case of beer, sugars that have been developed by breaking down carbohydrates in grains are naturally fermented by yeast; that is, they are eaten and digested into alcohol. If you were to develop this sugary mixture naturally (which happens all on its own in the correct conditions) you would undoubtedly eventually find naturally occurring yeasts that would appear to devour the feast and leave behind their lovely excrement (never thought of it like that did you?).
In our case, with yogurt, nearly the same process occurs naturally. Fresh milk whether from goat, cow, or dare I say rat, when left out, will most likely turn to yogurt through naturally occuring bacteria that develop in the milk over a course of hours. This was most likely the original yogurt discovery. Unlike the broken-down carbohydrates that our lovely friend yeast consumes, our little bacteria friends, mostly of the Lactobacillus variety, eat the sugars in milk a.k.a. Lactose and excrete Lactic Acid.
Your opinions may very, but I'm a big fan of both. I'd also argue that my worst batch of both homemade beer, and homemade yogurt, were still much better tasting than anything mass produced in either category.
So, lets start getting this thing going:

Step 1: What I Use to Accomplish the Task.

You probably have everything you need, hardware wise, to make a lovely batch of fresh yogurt. Yogurt only requires a few conditions/items:
Temperature between 100-110F
Active Yogurt Culture (I prefer 6oz Stoneyfield Farms PLAIN Yogurt)
Milk (any type will do, for lowfat or fatfree be prepared to add powdered milk)
Container
Time

There are plenty of ways to achieve those conditions, I'm going to show you how I do it.
I use:
An old cooler that only gets used for culturing things these days.
An electric burner that has a low enough heat setting to not kill my culture. *
A digital and a candy (and a laser:)thermometer (just a digital is fine and dandy).
Several used pickle jars, peanut butter jars, Ball jars, whatever you have handy.
Measuring cup.
Ladling spoon, large pot, wisk.
Towel and Weight for the top of the cooler box.

Note: There is a small risk of contamination that is mitigated by simply cleaning everything with dish soap and rinsing well right before use. Wash everything including the cooler, the thermometers, the jars, the large pot, everything! You can go the extra step and sanitize everything with a bleach solution; but I don't think it's necessary most of the time.

The heat source can be a number of things: an incandescent light bulb, heater element from a dehydrator, hot water might be especially nice if you have a resevoir in your cooler like i do (I actually hadn't considered this before and will attempt it next batch), etc.

Next step, the Ingredients!

Step 2: Warm-up and Cool-down

We'll get our incubator setup by making sure we can keep a constant temperature in the cooler with our electric burner. Once we get started with the process of making our yogurt, we need to get it into this box with as little fuss as possible, and leave it there for a few hours, so setting this up now will save you some possible frustrations later.

You're also going to start filling your kitchen sink with cold water and some ice. This will speed things immensely while cooling down the milk mixture.

Next, on to some yogurt making:

Step 3: Ingredients and Getting Started.

Ingredients are rather simple:
1-Gallon of skim(fat free) milk
3-cups Powdered Milk
6-oz Stonyfield Farm plain lowfat yogurt.

Note: Some folks prefer to sweeten the milk mixture prior to incubation, they'll use maple syrup, honey, and other sweeteners. I prefer to sweeten mine after it's already "yogurt" and allow the full tang to come through for granola and cereals.

Another note before we begin: If you aren't sure how much room you're going to have in your storage jars, use them to measure the milk you put into the large pot. For example, if you only have 3 jars and aren't sure how much of the gallon they'll store, pour milk into each jar, leaving about 1/5 space for the powdered milk and yogurt starter culture, then pour those into the large pot and put your leftover milk back in the fridge.

To start:
Pour the gallon of milk into the large pot and wisk-in 3-cups of powdered milk (approximately 3/4-cup per quart). Place your CLEAN thermometer in the milk and heat to about 185F; wisk it frequently and be certain not to scald/boil the milk.

The next step can move pretty quick so get ready:

Step 4: Cooling It Down

Move the large pot, wisk, thermometer and all to the ice-watered sink. Wisk and wisk until the temperature comes down to about 110F. Then remove from the ice bath and back to your work area (stove).
Empty the contents of your active yogurt (the store-bought one) into your milk mixture and give it a good stir, then (fairly quickly) start jarring that concoction up!
Place the lids on their jars, but don't seal them tightly, you want to allow a bit of room for excess gas to escape.

Next step: Incubator!

Step 5: Incubator!!!

So we've got the incubator all set, now lets get those puppies in there, right on the shelf that screams "Make yogurt on me!"
Then get that sucker closed. Make sure it comes back up to temperature, and not TOO high (above 110F can start to kill your culture, you'll just get a soupy, yucky mess).
Now let this set. I prefer about a 10 hour incubation at 105F. Anywhere between 6-14 hours is fine and all depends on how you like your yogurt. The longer you let it incubate, the firmer, tangier it will become.
At the end of your preferred incubation time, get the yogurt (yes, it's now yogurt, not "milk mixture":) into the fridge, or if you're in a hurry, you can do the ice-water bath and stir a jar in it to cool it quickly. The sooner you get it cooled-off, the quicker it stops the culture/stops incubating.

Next step: Consume!

Step 6: Consume!

Making a smoothie is one of my favorite ways to slurp down this luscious staple.
I really like using frozen fruit for mine, because i like having very cold smoothies and I do NOT like adding ice to mine, the fruit do double duty! Any fruit will do, and I always try to add some wheat germ, sunflower seeds, peanut butter and other proteins. Oops, not pictured is my smoothie necessity, a banana!

Try this:
Yogurt
Frozen Peaches
Frozen Strawberry
Peanut Butter (just a tspn or so)
Banana
Honey
Wheat Germ

Give that as many pulses in the blender as you need, pour it into a glass, and taste the rainbow!