Just two ingredients needed: vanilla beans and vodka. The amounts depend on the size of your container. I used this cute little vessel from Hobby Lobby, which holds about 12 ounces, and two vanilla beans. The beans can be a little pricey, but are totally worth it. I got mine at an international food shop for about $4-5 each. Fresh beans are best, when they are still bendy and sticky.
Just bend the beans in half and put them in your vessel, and then fill the vessel with vodka. You'll notice the vodka takes on a amber color after just a few days, and will darken with time. Turn it a few times every couple days, and after 6 weeks it will be ready to go. The alcohol smell will be nearly gone, and the vanilla smell will be fantastic! The color will be a little lighter than store-bought vanilla. Leave the beans in and use the vanilla as you need it.
If you're in a hurry, you can add more beans at the beginning to speed things up a bit.
Why the vodka? The alcohol is what extracts the vanilla oils from the bean (hence, vanilla extract). If you look on your store-bought vanilla bottle, you'll see that alcohol is an ingredient (but only in the real stuff- I have no idea what's in imitation vanilla).
Happy vanilla-making! We keep two bottles going at once so one is always ready to use. Enjoy!