Sharp drill bits are fun to use. They work so well. Dull bits are dangerous. They can break. One broke for me once and went through my thumbnail and out the other side of my thumb.
Step 1: A dull bit and a sharp bit
The bit on the left is a little dull. Notice the glint of light on the cutting edge between the two flutes. Compare that with the crisp edge on the freshly sharpened bit on the right.
Step 2: My favorite sharpening tool
People who know what they are doing can sharpen bits by hand. In theory, hold the bit with the shank angled off to the left at about 59 degrees. As the bit contacts the grinding wheel, simultaneously move the shank farther left and downward while twisting it clockwise. I have tried, but I have never been able to make it work for me.
I bought this bit sharpening tool almost 30 years ago for less than $20. The same tool is still available at Amazon and other places, and it is still less than $20.
A Drill Doctor is a very nice tool, but it costs four or five times the cost of this tool. I do not sharpen bits often enough to justify the cost of a Drill Doctor.
Step 3: Set to 59 degrees
This sharpening guide can accept drill bits with several different profiles. My bits have a 59 degree profile on the cutting edge. Set the tool to 59 degrees and tighten the thumbnut.
Step 4: Catch the edge
The tool has a small tip and the edges of the bit's flutes rest against it. You may have to raise or lower the tip so it fits against the flute edges properly.
Step 5: How much overhang
As a starting point make the overhang (space between the yellow lines) equal to the radius of the bit (space between the green lines). See the next step for why it matters.