Making a trailer is pretty easy in theory. First you pick your video editing software of choice (as stated above, mine is Windows Media Player, free and easy to use). Then you storyboard and script your trailer on a piece of paper (you can use any technique, whether it be elaborate sketches or stick figures). Now, unless you can draw and have the patience for it, the tricky part lies in finding material to put with your text script. Your storyboard should be a general concept of what you want, try keeping it to vague pictures, unless you have some pro bono actors and a decent video camera on hand so you can film scenes yourself.
Then the searching starts. Expect this to be the longest, most boring part of the process. If you're just making it for you, Google is a great resource for everything under the sun. If you actually want to air it on Youtube, however, you have to watch the license of the pictures. If it's royalty free, creative commons, noncommercial, stock photos, then you can use it without guilt. Shutterstock.com is good if you're willing to pay a little. If, like me, you'd rather not, resources like Wikimedia Commons and Photobucket are great. If you want some quality art/photography by some really good amateur and professional artists, Deviantart is a great resource. A lot of people will let you use their pictures for free, just as long as you ask permission ahead of time or credit them somehow.
Now, good trailers have some kind of audio, whether it be voice-overs, sound effects, music, or all of the above. The same licencing rule that goes for pictures applies to music/sounds. And like the pictures, there are some really good resources out there who simply ask you cite them if you use their stuff. My favorite cite for royalty-free music is Kevin Macleod's Incompetech.com. He has some great pieces on there for just about every occasion, and it's free if you provide credits according to his site's rules. Another music resource I found recently is Danosongs.com. He has a similar scheme to Kevin Macleod, with the same requirement that you credit the song if you use it.
Once you have your music, pictures/videos (and potentially permissions) you can import your photos, arrange them with your text, slap on some good audio, play with it a bit and voila! You have yourself a book trailer. Make sure to keep it between 30 seconds and 1.5 minutes. If it drags on too long, the audience will get bored, and if it goes too short they'll be confused. Optimally, if you can get just enough info in less than 30 seconds to keep your audience interested, you're golden!
All these insights are from my own experience, so take them with a grain of salt. I don't know the ins and outs of copyright laws, but so far these techniques have worked with no repercussions, and the worst that can happen is your video is taken down by Youtube unless you claim to have drawn and made all the resources yourself when you really didn't. The end goal is to have fun, do some good marketing, and try not to step on anyone's toes.
Now it's your turn! Have you ever tried making a book trailer for yours or someone else's work? How did your experience go? Any tips you or corrections you can add to what I've already said?