Very detailed description of the process developed and used by FatBastard09 at SMF as posted here. 

I have experimented a little bit with different methods and this is the one I am most satisfied with.

1. Pick your peppers and rinse the dirt off them, don’t scrub them.  The good bacteria you want (mainly lactobacillus) are already in your garden and on the peppers.
2. Cut the heads off the peppers (use disposable powder free gloves).
   1. I cut the rest of the peppers up into slices for larger varieties, but the small tabascos can go right in the jar after you cut the heads off.
3. Weigh the peppers on digital scale (I got a cheap one on AMZ for $15) and figure out your starting weight.
4. Weigh out your percentage of salt that you go with (this is where you can experiment).  You need a minimum of 2% by weight but you can go anywhere from there within reason*. 
   1. There are different philosophies on salt, I have used Himalayan sea salt and Morton’s Canning and Pickling. Lots of people say not to use iodized because it can hurt the bacteria, but they are pretty robust.
   2. I used 3.5% this year, 2.5% last.  Next year I will most likely use 4%
5. In a big glass bowl (don’t use reactive metal) mix the peppers and salt together using your hands (if the peppers are not crazy hot ones you can/should use your clean hands, it will add another type of bacteria to your mix – variety is good).
6. Take a clean glass mason jar (or food-grade plastic container) with an airlock and put it on the jar.  Fill the jar up to about 1.5 inches from the top with your peppers.
   1. Take a look at the pics above, I have a few examples.  You can get plastic lids for mason jars anywhere, cut a hole in it, and put rubber stopper (any hardware store should have them). 
   2. You should be able to get airlocks anywhere people sell beer/wine brewing supplies.  The beer distributor near me started selling that stuff last year (I paid $1.79 per airlock).  AMZ has them too.
7. Leave the jar at room temp (65-85F) for at least 24 hrs.  The salt will pull a good bit of liquid out of the peppers.  Swirl the jar around a little to mix the salt up into the liquid.
8. Once you don’t see any more liquid level increase (~ 24 hrs, kinda depends on a lot of things) fill the jar up with distilled water (~$0.99 a gallon) and swirl the rest of the salt around into solution.
   1. Leave about  ¾  inch or a little more at the top, I have had airlocks overflow when more water gets pulled out of the peppers.
9. Leave it out a room temp for a while, I am seeing that the longer it sits the more flavor you are going to get.
   1. You will see it actively bubbling within the first day, that means it’s working.  The lactobacillus are converting the free sugars to CO2 and alcohol with all kinds of good by products that drop the pH and free up all kinds of flavors.
10. Periodically swirl the jar around to get it mixed.  I don’t like opening mine up to mix it because it opens the possibility of introducing yeast strains that grow in the salty environment (Kahm yeast is often cited).  They are typically not harmful but will impart a different flavor.  I’d say about half my ferments get infected, I just scoop it off the top when I process the peppers.
11. When you think you have let the peppers go long enough (Like I said in my original post, I have let them go 2-3 months and the sauce was good, 6-8 was even better), I wouldn’t pull them for at least two weeks (again, opinions differ), put them in the fridge for a while (days, weeks, up to you). 
    1. The fermentation is still ongoing at this point, but it is slow due to lack of available sugars and the fridge will help mellow flavors out and make a better sauce.
12. When you are ready, take the peppers out and put them into a blender or food processor.  Be careful depending on the pepper variety, you can pepper spray your whole family doing this with something as tame a serrano (trust me).  I am currently waiting for the weather to get above freezing for a couple days so I can process more out on the deck, with a fan blowing from behind me, while I am wearing a respirator…
13. I use a food mill (a must if you grow tomatoes the way I do) to process the blended peppers.  This gets all of the seeds and most of the skins out of the liquid.  I run the mash that comes out the end back through 3 or 4 times to get the most flavor out of the peppers.  Keep all that liquid that was in the jar, it’s all good.
14. I then weigh out the liquid and calculate by weight the amount of vinegar I am going to put in.  I have been using 30-33% in my experiments. 
    1. I have used a couple kinds of vinegar, I like apple cider the best (Sam’s actually had Apple Cider Vinegar with the mother still in it that I really liked).  White works well, red wine vinegar too, it’s up to you.
    2. I do very small (~ 2oz bowls) batches and taste them (have crackers handy in between taste tests (cleanse that pallet).   Then once I figure out what I like, I weigh the big jar and add the weighed out proportion of vinegar
15. Back to the fridge.  The longer you leave it, the better the flavor develops.  I have always bottled some ASAP just so I have some to use, but the longer it sits the better (at least a couple days).
16. Now, here you have a choice.  You can bottle it and start using it, or you can do some leg work and make this look professional.  The vinegar and pepper sauce will separate, that’s fine.  You can just shake the bottle when you use it. Your other option is to use an emulsifier to get the mixture to stay in suspension.  There are options on that, I will explain what I do.
    1. I bought xanthan gum on AMZ to use as an emulsifier.  It’s a natural plant extract, not a chemical and even organic certified foods have it in them (if you are that kinda person).  I take the sauce and heat it up to around 150F (you guys all have thermometers around) and then pull out the immersion blender.  Run the blender in the pot and get a nice vortex going and sprinkle a tiny (I mean very tiny) amount of gum into the whirlpool.  Blend it and sprinkle a little more and turn off the heat.  If you put too much gum in, it will turn into a slime, so be careful.  Pull a little sauce out and put it in a small diameter glass jar where you can see it separate.  If it separates within a couple hrs you didn’t add enough, repeat the heating step and add more gum until you get it right.
17. Once your done processing the sauce, put it in whatever containers you have.  I bought cases of 5oz hot sauce bottles on AMZ with lids and dasher caps for less than $20.  Put the rest in some mason jars in the beer fridge and refill your shaker bottle from it.
    1. I also bought shrink capsules to put over them that you use a hair dryer, again I made Christmas gifts out of these
    2. If you are into labeling, Avery labels sells wine bottle labels that are designed to go in and out of the fridge (Avery # 22809) that you can print on a decent laser printer.  My kids have come up with cool labels with our family photos on them.

 Now a couple notes on what I wrote above:

• There is a ton of info on the web on how to do this differently than I have laid out above, again this is what has been working for me.
• The salt concentration you use is up to you, I found that even the 3.5% by weight that I used this year didn’t have a salty taste at all.  I actually added salt during step 16.
  • The amount of salt you use will affect what species of lactobacillus actually survives to ferment your sauce, so different salt levels in different ferments may end up tasting different and not just the salt taste, so there is a ton of room for experimentation in this.
• I have spiked mine with garlic as well, do that at step 6 when you put your peppers in
  • One thing weird did happen with a batch of garlic once.  The garlic turned blue.  Found out that was a natural reaction when I used tap water that had too much copper in it.  Haven’t seen that since once I started using distilled water (although it could, I am sure there is copper in some of those processes)
• For those of you that are really into probiotics, that’s exactly what you are making here.  If you don’t heat your sauce up to at least 140F for 5 minutes, even with the vinegar you are going to have live bacteria.  Therefore you need to keep your sauce in the fridge, you don’t want bottles exploding from ongoing fermentation.  I put all the sauce, even the pasteurized into the fridge.  Remember, you are not aseptically packaging your sauce so even cooked sauce can have bacterial growth in your jars/bottles.
• If you skip the vinegar and heating step, you absolutely have to refrigerate the sauce and periodically release pressure.  You can leave the airlock on in the fridge if you have the room too.  You’ll need to shake that bottle up each time you use it but its really good too.  It will be a little more sour than the stuff with the vinegar, in a different way. 
• I have had good results with store bought starters (Caldwell’s) that are sold for sauerkraut.  You would follow the mixing directions on the packet and put it in when you put the peppers in the jar (step 6 above).  This basically inoculates your ferment with ideal lactobacillus which overpower the naturally occurring bacteria and keep the ferment clean.
  • On the downside, they are not exactly cheap.  I think I paid $20 for a box of 6 packets.  I used some for kraut and some for pepper sauce.
  • The other alternative that you have the second year is to use some liquid from you best looking jar (one that didn’t get any of the yeast growth is ideal) and spike it in during step 6.  That seemed to work for me this year.