The site where I originally learned this technique did a terrible job at explaining it, and it took me forever to figure it out. I decided to make a better set of instructions after several people on another list asked me how I did it.
Braided cast on:
**This cast on uses a modified version of the long tail cast on**
Tutorials can be found here: http://www.knittinghelp.com/knitting/basic_techniques/ (video)
Or here: http://www.butlercountryknit.com/longtail.pdf (PDF)
Or here: http://www.knitty.com/ISSUEsummer05/FEATsum05TT.html (scroll down)
Make a slip knot using two colours of yarn held together, place the knot on your needle. Hold the free ends out of the way.
Hold the yarn colour at the top side of the needle (green) around the front and then back of your thumb, with the tail hanging down the palm of your hand.
Hold the colour at the bottom end of your needle (red) around the front and then back of your index finger, with the tail hanging down the palm of your hand.
Hold the tails out of your way using the other three fingers of your hand.
Put the needle under and up through the palm side yarn coming from around your thumb, grab the front yarn going around your index finger and pull it through.
Release the yarn from around your thumb and tug at both yarns to snug the loop around the needle.
Move the index finger (red) yarn OVER the thumb (green) yarn and place on your thumb; place the other (green) yarn around your finger as before. (Always move the top (finger) yarn OVER the bottom (thumb) yarn to create the braided effect)
Repeat step 3-5 until as many stitches as needed are cast on.
Your yarn will begin to twist after a few stitches are made, don't worry, this is normal, just ignore it, or stop periodically and let your needle hang to untwist the working yarns.
If you have any questions or if anything is unclear, let me know and I'll try to explain better.