Step 1 - Find a log! Use fresh cut hardwood, oak works great. Logs that are 4" - 6" in diameter and 3' - 4' in length are best. 

Step 2 - Drill your holes. Use an 8mm drill bit and make holes approximately 6 inches apart  all over the log. 

Step 3 - Insert the plugs into the holes by tapping with a mallet. They should be a tight fit. Get them all the way in until they are flush.

Step 4 - Seal all of the holes with wax. Use paraffin, bees wax, soy wax etc. Melt the wax down and use a brush to seal over all the spots where a plug was put in. 

There are great resources and videos online for mushroom log inoculation. Search to learn more.