I found this a really useful link...
http://www.woodworkingtips.com/etips/etip031010ws.html
I used a bit like this... I don't have a forstner bit, as they recommend, but was able to make this work with a flat wood bit...
Since I did not know at the outset what a "forstner" or a "flat wood" bit were, I also found this site useful...
http://www.diydata.com/tool/drillbits/drillbits.htm