Originally contributed by Parrots, thanks!
I remember when i first started making my own line out docks, even though there are some instruction here how to do it, I thought it could be a little clearer.
I had to make a fellow head fi'er a LOD I promised him awhile ago at no charge so decided I would take some pictures and post a short guide here.

What you need:
Soldering iron
Solder (with added flux) I find mundorf silver/gold to be the best.
Wire (your choice)
3.5mm Jack plug
iPod dock connector (Dock pictured is the best and easiest to use)
68k ohm resistor
Needle nose pliers (for removing pins from Dock connector)
Shrink tubing (for strain relief)
Epoxy or hot glue gun (for covering solder joints and stopping them breaking)
Third hand (make it lot easier)
Multimeter (to check for shorts, wires and solder joints touching)

I first start on the dock connector.

I then take all all the pins only leaving pins 2, 3, 4, 11, 15 and 21. Below is a picture showing both sides of the connector with one that has the pins already taken out so you know where the numbers start from.

You then bridge pins 11 and 15 together. Also bend pins 2 and 4 a little to the sides like shown in the picture to make soldering the wires on easier.

You then get a 68k resistor and Bend and cut it so it can be soldered between pins 11/15 and 21, cut it to a size that can still fit in the dock.

You then solder the resistor between pins 11/15 and 21.

You then get 4 pieces of wire (or 3 as you can use just 1 wire instead of 2 for ground) each of the same length and strip one end of each wire, I used 2pcs stranded pure silver for signal and 2 silver plated copper for ground.
If you use different types of wire, make sure both signal wires are the same otherwise you will get different sound in each ear (yes I have tried it lol) also make sure if you use 2 wires for ground then that they are also the same as each other or just use the same wire for both signals and ground.

Then solder one of the wires to either of the signals of the jack and then another wire to the other signal.

Then twist the 2 remaining wires together.

Then solder them to ground.

Now with a multimeter check that none of the wires are shorted and Mark the other end of the wires so you know which wires is which before covering the contacts in epoxy or hot glue and applying your chosen strain relief and screwing the jack together, again check none of the wires are shorted and do a braid of your choice (it's a good idea to then use a little shrink tube or tape at the end of the braid to stop it getting undone, you can take it off later) then cut the ends so all wires are the same length.

Then strip the ends of all the wires and again twist both ground wires together.

Then solder the twisted ground wires to pin 2 which is ground on the dock connector but before you solder make sure any shrink tubing you might want to use is already through the wires.

Then solder the right signal wire to pin 3 which is the middle pin and also right Chanel.

Then take the last wire which is the left signal and solder to pin 4 which is also left.

Again check with multimeter to check for shorts but at this point I personally check it's working by plugging it in to my iPod and amp, once you have checked that, cover the contacts with epoxy to stop them moving about and shorting or the solder joints coming off and then place in the dock.

You then place a little hot glue inside the connector and then click the other side on and you have you LOD made in under 30mins costing less then $10 in material, if you was to buy this same LOD from some DIY'ers here then you would be charged more then $100.
Good luck.

Just wanted to add a diagram for the connector wiring. It was easier for me to refer to it in this format than text while working.



More at: http://www.head-fi.org/forum/thread/538927/diy-lod-full-step-by-step-do-it-yourself-guide-with-pictures