Jerry Hossom's method: (from a thread on Blade forums)
This assumes you have a 1x30 or 1x42 belt sander. They can be had from discount equipment suppliers such as Harbor Freight or Enco for as little as $40. Get one. You'll find a lot of other uses for the sander so the money is well spent.
Now go to Lee Valley Tools for sharpening belts. http://www.leevalley.com/wood/page.aspx?c=2&p=...,43072 I'd suggest the following to get started. (Started as in these will probably last you forever.) Understand that you don't use all of these on all knives or steels. It usually depends on how bad the edge is and if it's tool steel or high alloy stuff.
Aluminum Oxide Belts: 180, 320, 500, 1200.
15 Micron SiC belts (get two, you'll probably use these exclusively after you get your knives sharp to start with.)
Leather Honing Belt. This is what makes owning a belt sander worth it. It's basically a power strop and can put a fine polished edge on a blade in no time. You might want to get two. Use one with compound for polishing and keep the second one clean for just stropping.
Then go to
http://www.popsknifesupplies.com/compound.html (THIS LINK DOES NOT WORK ANYMORE)
Buy the 525 white compound. It should last you for the rest of your life. You might also want to get some of the HF1 compound which is finer, and for very fine edges on small knives could be a good choice. While there, brouse around. There are many other ways to spend money, including getting your own Bader BIII Variable Speed Grinder.
Start with the finest belt first and move to more aggressive belts as you get a handle on how they cut. If you have some cheap kitchen knives, they're great for learning on. Once you get a feel for this you'll be starting with a belt that's close to what you need for each kind of knife and how dull it is. 500 grit, 1200 grit then 15 micron is probably good for most knives. If the edge is in pretty good shape, jump right to 15 microns and be done with it. If it's in really bad shape start with 320, or if you are entirely reprofiling the edge on a large knife use the 180.
What you are going to be trying to do is to raise a fine wire edge along the blade, holding the blade at about 15-20 degrees to the belt (edge down). You'll know what a wire edge is when you first see it. It will look like the edge is falling off, and in a way it is. Use a light touch until you see how each belt cuts, and gently press the edge into the belt with the edge held on the belt in a slack portion just below the top idler wheel or above the platen at the bottom. (Oh yeah, throw away all the safety shields; they just get in the way.) You want a slack belt, but not too slack so stay near where the belt is supported or has backing.
In all cases, except with the leather polishing belt, take one pass of the edge across the belt, then dip it in some water (a bucket is nice) and wipe dry. Repeat. This will be a drag when you get started, and when you get a feel for how the heat builds up on the edge you can probably take 2-3-4 passes before dipping. But DON'T let the edge get hot. DON'T let the edge get HOT!! This isn't all that difficult or threatening to the blade; you just need to be aware of heat build up.
Once you have a very fine wire edge with the 15 micron belt, put on the leather belt and apply some white compound, not too much. Strop the edge against the leather belt - at the same angle. This will polish the edge and strip away most or all of the wire. If some wire is still there, you can remove it with a wad of paper towel run along the length of the edge.
Play with angles as you see fit. depending on the type of knives and whether you want hair popping sharp and seriously tough. In either case you will get a convex edge which is inherently tougher than flat bevels. Don't try to get the most insane, hair popping edge the first time you try this. You won't. It takes a little skill and time to get a feel for how the belts cut the steel, and for how they interact with each type of steel and kind of edge. That said, you'll probably get the sharpest edge most people have ever seen in less time than you thought possible.
Our reason is quite satisfied, in 999 cases out of every 1000 of us, if we can find a few arguments that will do to recite in case our credulity is criticized by someone else. Our faith is faith in someone else's faith, and in the greatest matters this is most the case.
- William James, from The Will to Believe, a guest lecture at Yale University in 1897