Preparation
You will need two 8- or 10-gallon plastic storage bins, a drill with 1/4-inch and 1/16-inch drill bits, newspaper and 1 lb. of red worms. The storage bins must be opaque, so get colored ones, the darker the better. You will also need some soil so the worms have wiggle room and a piece of cardboard big enough to fit over the top of the bin to keep out the light. Worms tend to shy away from light.
Start by drilling about 20 1/4-inch holes in the bottom of each bin, spaced evenly. This is mostly for drainage but also for an outlet for the worms when there is too much compost in the top bin. Drill vent holes about 1 inch apart along each side of the bins using the 1/16 drill bit. On only one of the lids, drill 30 holes spaced however you wish.
To prepare bedding for the worms, cut your newspaper into 1-inch strips. Moisten it by soaking the strips in water and wringing them out so they are just moist. Too much moisture may cause problems. Stack the strips 3 to 4 inches high, and throw in a little bit of soil. Now add your worms on top of the bedding (1 lb. should be good to start). Then put the piece of cardboard on top; the worms love to eat cardboard and will break it down within months. Make sure the cardboard is moist as well, so the worms can easily eat it, but make sure it isn't too wet.
Put the container with the worms and bedding into the other container and put the lid on. Place the bins in a well ventilated area, on top of a couple of bricks or something sturdy enough to support the weight to allow for drainage.
Feeding the Worms
The best foods for worms are bread, grain, cereal, coffee grounds, coffee filters, fruit, tea bags and vegetables. Worms can eat half their weight a day, so if you give them foods they like, you'll get compost that much quicker. Never put in foods the worms don't like: dairy products, fats, meats, feces and oils.
Start slowly with your feedings, putting the food so it is readily accessible. Worms are very quick breeders; within about a month their population will nearly double, at which time you can put more food in. Just make sure that you put the food in different spots, as the worms won't eat again near the compost. So once you've run out of spots to feed them, it is time to dump the compost and give your worms fresh surroundings.
Tips
If fruit flies gather or the bin is starting to stink, you may be adding too much food or giving the worms food they don't like, so the food is not being eaten. Another possibility is that the food could be too exposed to the outside air or or the compost bin is too wet. If the worms are dying or trying to escape, your bin is too full with the worm's compost or it could be too dry, so check the bin.