Update 3 hours later: Um, so the writing on that turned out really small, didn't it?! If you click on the tute it pops up in another window where it's slightly enlarged (you can enlarge it more, if you press CTRL +). But, for convenience, I'm going to post the full sized pictures and expanded descriptions below:
1. Cut the handles and bottom seam off your plastic bag
2. Fold the bag up to make it easier to cut
3. Cut the bag up into 1" strips (you should be able to get 16 pieces out of one bag)
4. Open up all of your strips. Choose one of them to be your base strip
5. Slide a second strip over your base strip
6. Slide the end of the second strip through the loop that you made in step 5
7. Gently tug on the two strips to slowly tighten the knot
8. Give it one last tug to tighten the knot. The second strip now becomes the new base strip so that you can start the process over again! Keep looping and knotting until you've use up all of your strips!
9. Roll your new Plarn (plastic yarn!) into a big ball. One grocery bag will make approximately 8.5 yards of yarn!
Sometimes the strips break (even if you tug gently), or they start out broken because there was a tear in the bag. That's okay! Just tie the cut ends in a knot and use it like a regular strip! I actually like these 'imperfect' strips, because the little pokey ends give the crochet piece a handmade, obviously-recycled look that I find very appealing. Of course, it's a matter of personal taste, so if that look would bother you, you can just recycle the broken strips when you recycle the handles and bottom seams that you cut off the grocery bag in the first step.
If you'd like to see more recycling with crochet projects, check out the January 2013 section of my Free Crochet Patterns page.