If using pasteurized milk - Slowly heat the milk up to 180 degrees and then let cool back down to 110 degrees. Stir in the yogurt and place in a warm place (about 95 – 105 degrees) about 8 hours or overnight. If you have any whey (a light yellowish liquid) standing at the top of your yogurt, just take a paper towel to soak it up.
If using raw milk - You have the option of how high you want to heat your milk. Slowly heating to 110 degrees will keep the enzymes of the milk intact, but will produce a runnier product (more like kefir). You can also heat all the way up to 180 degrees to make a thicker product. So, to make yogurt with raw milk once it is at 110 degrees (or brought back down to that temp after higher heating) add in 2 tablespoons of yogurt. Stir well and let set in a warm place for about 8 hours.
You can let the yogurt sit out for up to 24 hours in order to remove all of the lactose from the milk, but I find it difficult to keep it at a steady temperature for that long and it becomes less smooth. On average I let it sit for about 12-14 hours.