It is made by a process of lacto-fermentation. You can read more about it here
You will need a quart or larger GLASS jar with a lid and a sharp knife and cutting board or food processor and a large bowl.
Ingredients:
Cabbage
Salt

Chop cabbage in to ribbons. Put it in a large bowl with some salt. I used 1 tbs but next time I will use less.
Pound the cabbage and salt until the juice comes out of the cabbage. This takes about ten minutes.

I used the handle of my large cleaver. It worked pretty well.
Pack the cabbage into the jar. This is an old pickle jar. Keep putting cabbage in and packing it. The jar holds more than you think it might.

Make sure all the cabbage is underneath the liquid so it doesn't get dried out.
Leave one inch of space at the top of the jar, the contents will swell during fermentation
Place one whole leaf, cut to size on top of the jar

This is what is looks like:

Leave it at room temp for three days, or until it tastes as "sour" as you want it.
Don't tighten the lid all the way, because, rarely, the gasses that occur during fermentation can cause the jars to pop. It's not a dangerous explosion, but the jars crack and it makes a mess, is all.
You can see the change in color from fresh green to a pale yellow.

Discard the whole leaf from the top and store the jar, with the lid tight, in the fridge. Keep the sauerkraut pushed below the liquid level so that it does not dry out.
EAT!!

Once made, sauerkraut is a very safe food because its high acidity prevents spoilage. USDA also recommends pasteurizing sauerkraut for storage. This is not necessary if the raw sauerkraut has been properly made and stored, and will needlessly diminish the nutritional value. A slimy or excessively soft texture, discoloration, or off-flavor may indicate spoilage.
http://en.wikipedia.org/wiki/Sauerkraut