There are many different variations of this that can be found all over the internet, but this is the one I use. I’ve used the powdered version but didn’t like it nearly as well. It is very economical, easy to make and with an essential oil added, smells quite lovely.

1/3 of a bar of Fels Naptha soap (or Zote soap, even Ivory soap will do) grated (found in the laundry aisle of Walmart)
½ c Washing Soda (found in the laundry aisle of Walmart)
½ c Borax (found in the laundry aisle of Walmart)
large 5 gallon plastic bucket (I get mine free from the bakery section of my grocer – the empties from frosting)
essential oil (optional)

In large sauce pan mix grated soap and 6 c of water, heat to boiling. Melt soap completely. Add Washing Soda and Borax and stir ‘til all has dissolved. Remove from heat. Pour 4 c HOT water into clean bucket and add soap mixture. Stir well. Now add 22 c HOT water to bucket and stir. Once it has cooled to room temperature, add 10-15 drops of essential oil (I use lavender/vanilla – and I will often use more – perhaps close to 1 t).

Let mixture sit for a day or so and it will become gel-like. Use ½ c per load.

UPDATE – Here is the price breakdown I did in February 2011 of cost for homemade versus store bought.

Laundry Detergent:
Borax: $3.49
Washing Soda: $3.99
Fels Naptha: 1.34

I can get 12+ batches of detergent from both the Borax and the Washing Soda and 3 batches from the Fels Naptha. Each batch cleans about 52 loads of laundry.

cost per load (prices are all at Walmart.com)
Homemade: $.02
Xtra laundry detergent (one of the cheaper brands) $.08
Tide powder: $.15
Tide liquid: $.20

So, it is 4 times more expensive to use one of the cheaper brands on the market, and using liquid Tide is 10 times more expensive.