Step One: What You Need
You'll need a drill, tape measure, slotted screwdriver [Eric: what is a slotted screwdriver – another word for flat? Or something else?], safety glasses, a dust mask and, of course, a peephole. These will be available from your local locksmith and should cost around $25.
Step Two: Making a Hole
Before you begin drilling, measure a height that is comfortable for you and the rest of your family to use, and mark the point on the door where you would like the peephole to go. If your door has the same thickness throughout, you may put the peephole either in the center or more on the side. If however, you have a panelized door, or one where the outside frame is thicker than the center panel, the peephole must go on the side.
Because you’re working at eye level, make sure to put on safety glasses and a dust mask before starting. Use a small drill bit to make a pilot hole completely through the door at the mark you made in order to confirm placement. This hole can be as small as you want it to be and is done for the purpose of positioning as well as creating a track for you to drill a larger hole for the peephole to go into. Switch to a drill bit of the diameter indicated in the peephole instructions, and drill approximately halfway through the door. Move to the other side of the door and complete the hole. Drilling a hole from each side reduces the chance of splintering or deforming your door when the drill bit exits.
Step Three: A Clear View
Make sure that the correct side is facing out, or else your visitors will all appear to be very small and very far away! Then position the two sections of the peephole in the door and tighten. Use your screwdriver in the slots of the interior bezel to finish tightening the peephole.
Congratulations, now you won't ever have to answer your door again without knowing who is on the other side.