Get a computer for use as your server. Make sure that it has a fast processor (1.0 Ghz or faster), decent RAM (1GB or more) and a large hard drive (think 500GB or 1TB). You need to have room to host other people's files.
Follow instructions to set up your web server. It's outside the scope of this how-to, so you'll need to conduct your own research on how to get that done (see the Resources section).
Make sure your server always has power, so there's virtually no down time. Down time is something customers pay pretty close attention to when looking for a web hosting service.
Set up a website advertising your hosting service. Market different packages and options, based on what your web server is capable of supporting.
Use legal support to make sure that you are in compliance with local, state and federal business requirements.
Use legal support to clearly outline the terms and conditions of your web hosting. For instance, make sure your policies are clear regarding adult websites, music and file sharing.
Make money offering space on your server to others. Market your website to sell your hosting services, and you should be making money in no time.