A pinhole camera is a camera in the simplest form. It consists of a light tight body, a pinhole to let just enough light in to take a photo and last but not least, photographic paper (or film).
They can be made from most anything from oatmeal cans to match boxes, to empty film cans. As long as
you can put the film in it and seal it from ANY light coming in, it can be a camera!

A Pinhole camera works off of the pinhole theory (Imagine that!!!) Better demonstrated by this image

The light enters the pinhole, is confined by the pinhole and hits the photographic film on the oppisite side of the pinhole and forms an image.

The history of the pinhole is pretty interesting.
As far back as 500 B.C., Greeks such as Aristotle and Euclid wrote on naturally-occurring rudimentary pinhole cameras. The ancient Greeks, however, believed that vision is enabled by rays emitted from the eye. It was the 10th-century Muslim mathematician, astronomer and physicist Ibn al-Haytham who published this idea. He also invented the first pinhole camera after noticing the way light was streaming through a hole in a window shutter.

to make the camera...

-You need a container that can be made light tight. I suggest a matchbox or oatmeal container since they are easy and there is lots of information on how to make them into cameras.

-A piece of tin foil or a soda can to make the pinhole in.

-Flat black spray paint helps make everything light tight.

-epoxy or glue.

-sewing needle or very small drill bit.

-A piece of fine sand paper

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For developing the photographic paper...

-3 developing trays (the size or bigger than your paper).

-paper developer

-stop bath

-paper fixer

-safe light

-tongs (to keep your fingers out of the chemicals)

you can find most of these items below!

This subject has been covered in very good detail so ill cover the basics and give links as well.

first thing to do is to make your container (camera) light tight. Light tight means exactly that. NO and I mean NO light must be able to enter the container. Start by spray painting the entire inside of your camera FLAT black. Use black electrical tape to cover any creases or holes where light might get in.

Now cut a hole about the size of your thumb print in the middle of the container (measure from top and bottom and divide by 2 to figure out where the half way point is)

Ok... Now time to make the pinhole! Measure from the hole you just made to the back of the camera. Take this number and wright it down. There is a specific formula for figuring out the pinhole size but this site makes it easy! just plug in the distance from the hole to the camera back in the "depth of camera" spot and press calculate! Now the number you need is the "Optimum Pinhole Diameter". The answer will be in MM. It should be a very small number like .5mm for a 5 inch deep camera or a .3mm hole for a 2 inch deep camera. I recommend cutting a square piece out of a soda can but foil works as well. Its important that you use metal and that your pinhole is perfectly round and clean otherwise your photos wont come out right. Now drill the correct size hole in the piece of can or foil. sand on both sides of the hole to make sure the hole is clear of any shavings or rough edges.

Now epoxy or glue the piece of foil or can to the inside of the camera so that it covers the thumb sized hole you made. Let it dry completely and make sure its a good seal and light tight except for the pinhole.

The only thing thats left is to make a shutter for it so that light doesn't enter until you want to take a picture. I just use black electrical tape over the pinhole but there are better ways to make one.

a great site on how to make one out of an oatmeal box (very easy!)

a great site on how to make one out of a match box using 35mm film (really nifty but more complicated)

Believe it or not this is the tricky part. To load the film you must have a very very very dark room. don't open the photographic paper unless you are in the dark room. You can have the safe light on so that you can see. Regular film must be loaded and unloaded in complete darkness where the paper can be in the safelight. Load the paper into the camera opposite the pinhole, close the lid and shutter and make sure the rest of the paper is put back into its box then you can take the camera out into the light. Find an interesting subject, aim the pinhole at it and open the shutter! As long as the shutter is open, your taking a picture of whats in front of the pinhole. How long you want the shutter open depends on how bright it is. Anywhere from 1 second on a bright sunny day to 30 minutes on a dark gloomy day. It takes practice to get this right so don't give up if your first few don't come out! Now that you have taken your photo, it's back to the darkroom! You will probably want to prepare your chemicals before you start taking any pictures and in the light so you can see what your doing. prepare the chemicals as the directions say. Developer in one tray, stop bath in one, and fixer in the last tray. Now in the dark, remove the photographic paper out of the camera. It should be blank white still, same as when it was put in. Put it into the tray with the developer and watch the magic happen! It normally takes about 1-2 minutes for the picture to develop. Make sure to "agitate" the developer the whole time the print is developing. When ready take it out of the developer with the tongs and place it in the stop bath. This stops the developing process. leave it in the stop bath for about one minute. Then put it in the tray with the fixer for at least 2-3 minutes, again agitating the fixer the whole time. Now its safe to look at your picture in the light!! Wash it off with water for about 4-5 minutes to get all the chemicals off and let it dry. What you now have is a negative of your picture! Fortunately its easy to make a print of your negative. In the dark with the safe light on, get another piece of your photographic paper and lay it face up (shiny sticky side) on a flat dry surface. Place your print down directly over it making sure everything is square. I recommend using a 15Watt bulb for this but your regular house lights will do. Turn on the lights for a second or two and then back off. Develop your print the same as the negative and there you have it!!!

This page has a very good description of how to develop your negatives and print including pictures.