OP by QOTH:
We made our bin for free using old pallets we got from behind the store (with permission) we nailed 3 sides together and hinged the 4th so that you can open it and turn it.
What you want to do is acheive a good balance of brown and green.
Brown would be leaves, newspaper (uncolored), paper, coffee grounds (you can get big bags of used coffee grounds for free at starbucks)
Greens would be kitchen scraps, grass clippings, etc.
You want to strive for a 50-50 mix of brown and green. You want to make a pile aprox 4x4 if you can. And you want to turn it when you get a chance with a pitch fork or something. The more you turn it the faster you will get compost.
You need to keep it moist but not wet. Damp as a wrung out sponge.
Things to avoid are pet and human waste, meat, dairy, bones. - these are either unhealthfull to you or attract rodents.
You will have bugs and worms in your compost bin as they are part of the decompostion process but your bin should not smell bad. It should smell earthy. If it smells bad its because its either too wet or you have too much green stuff in there. Grass clippings can be a culprit so make sure you mix your grass clippings with leaves or something brown first or let them dry out a few days b4 adding to the bin.
Compost can take anywhere from 6 months to a year to happen depending on how often you turn it. Once you have your "black gold" you just add it to your soil.
From
www.compostguide.com:
Tips for better composting
1. Don't throw away your kitchen scraps -- add them to the compost pile. Kitchen scraps are typically high in nitrogen, which helps heat up the compost pile and speed up the composting process. Egg shells, coffee grounds, fruit and vegetable peels and scraps are all outstanding materials to add.
2. If you're composting with a compost pile, bigger is often better. Heat builds up with a big pile. You don't want to get much bigger than about 3 feet by 3 feet though.
3. Keep your compost aerated! If you are composting with a tumbling composter, make sure you turn it whenever you add new materials. If you are composting with a pile, or in a static (non-tumbling) compost bin, be sure to mix up the contents so that the pile gets oxygen and can break down effectively. Use a compost aerating tool like this one.
4. Don't let the compost completely dry out. A compost pile needs moisture to keep the composting process active.
5. Don't keep your compost too wet so that it gets soggy and starts to stink. Just as too dry is bad, too wet is also something that you should avoid.
6. Too much of any one material will slow down the composting process. If you have all leaves, all grass clippings or an overload of any other single type of material, it can throw off the balance of the pile. In general, it's good to keep a mix of green and brown material (see main page for more details on this).
How to start a compost heap? 
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