Time of Year
Ideally, you should begin growing your chili peppers in January/February, beginning indoors and then eventually transplanting the growing plants outdoors once the last frost has passed.
You will need for night time temperatures to remain over 10 degrees Celscius, otherwise your chili plants will be damaged by cold and frost.
Get the Seeds
You can either purchase the seeds of the peppers you wish to grow or obtain them yourself from a pepper you have on hand or will purchase.
In order to obtain the seeds from a pepper, simply slice it down one side and spread open. Using the tip of your knife, remove the seeds by detaching them from the vein inside the pepper.
Allow the chili seeds to dry in a small sealed plastic container. Do not expose the container to sunlight. The seeds are ready once they break when bent.
Germinate your chili seeds by placing them between two layers of damp paper towel in a plastic container or freezer bag.
Keep the container/bag in a warm area outside of direct sunlight.
After 2-3 days the seeds should begin to swell significantly, and many will begin to sprout.
Plant the Seeds
Once your seeds begin to sprout, it is time to plant them indoors. Plant the seeds in multi-purpose compost spread 5 cm apart. You can use old yoghurt containers or other such items as pots indoors. The seeds should not be covered by more than 0.5 cm of compost.
The pots should be left in a warm area that is not in direct sunlight. A great place to keep them is on top of the fridge, which keeps them above room temperature (not just in terms of height).
Water and Wait
Using a spray bottle, moisten the compost above and around the plants. The goal is to keep the compost from drying rather than wetting it.
Most plants will begin to poke out of the soil between 1-3 weeks. Some species, such as Habaneros can take up to 6 weeks, so remain patient and true to the task.
Once your seedlings begin to poke through the soil, it is time to transfer them to surround them with light. Ideally, place them on window sills during the day and under flourescent bulbs (turned on of course) at night. Ideally, the plants shoudl receive 18 hours of light a day.
Continue to keep the soil surrounding the plants moist. Once the plants have grown their second set of leaves, it is time to plant them outside.
Pick a Spot and Make it Happen
Once the night temperatures remain above 10 degrees Celscius, and the plants are ready (see Step above), they can be planted outside.
Ideally, plants should be placed in areas that receive sunlight but also benefit from some shade. The soil should be sandy, however not too dry.
Plant the chilis by removing all of the compost surrounding the plant and placing it in a large enough hole that has been dug into the ground. Plants should be kept 12" apart from one another.
Wait for Flowers
With regular watering and sunlight, your plants should begin flowering. Flowering is a sign of healthy plants that are one step closer to bearing fruit. Plants that are planted outside are naturally pollinated by bees and other insects. Flowers will fall, giving way to peppers.
Enjoy the Peppers
The peppers will begin to grow. Once the peppers have reached a good size (varies with each type of pepper), remove them, wash them and enjoy them any which way you like.