I did want to lay to rest some of the Damascus Steel rumors that I've heard. First off, lets say what Damascus is. Damascus steel is only called Damascus because that is where the Crusaders first saw swords and knives that had a watery pattern in the blades. This was originally called "wootz" steel and was manufactured in India, where you can still see the remains of many forges built to face monsoon winds. The exact process to make true wootz was lost, though some French scientist (at least I think he was French) found a way to produce a reasonable facsimile. By taking steel and melting it down and adding a substance with sufficient carbon (like charcoal) to the liquid, the carbon would combine with the steel in the crucible. Then they'd pour it out and wait for it to solidify in little buttons of wootz, which they'd forge into billets (bars). By folding the metal over on itself the metal would form a wavy, watery pattern due to the two differing levels of carbonated metal. The fewer folds the more the pattern was pronounced, the more folds the lesser you would be able to see unless you were up close.
This part is where the legends came in. The folding process, which is called pattern forge welding, was originally done to purify the metal. By folding the metal and drawing it back out, you could work the impurities out of the metal. Now-a-days even the most garbage piece of rebar is of better quality steel than most of the middle ages swords. However, you still hear stories of swords that were folded 10,000 times and can cut through other swords. Metal will always retain the same qualities, so unless that metal could cut through another sword with only 1 fold, it can't do it with a million. By the way, here is a math fact for you. How many folds does it take to make a sword or a knife with 1,000,000 layers? Observe:

Fold 1 = 2 layers
Fold 2 = 4 layers
Fold 3 = 8 layers
Fold 4 = 16 layers
and so on until
Fold 20 = 1,048,576 layers of metal

So you see, it really wouldn't be impossible to create a piece of that complexity.

After the metal has been forged into the desired shape, edged, and polished, it would be dipped in an acidic bath that would react differently between the two levels of carbon in the metal, darkening one and shining the other. Some have also found a way to make Damascusized steel by using cable. Here is a pic.


And that is Damascus Steel.

Disclaimer: This is what I did. I'm not telling you to run out and do this, so if you get hurt, I'm not taking any responsibility. Please, in what ever you do but most especially forging, SAFETY FIRST.

Now, here's how I built my first forge. I went to Wal-Mart and purchased a cheap grill. I bought the table top model because I am impatient, but in hind sight, I should have gotten one with legs that would have put the bowl around waist height. I used a reciprocating saw to cut into the metal on the front, enough so that I could bend the metal back on the top and bottom. This created a large space where I could insert the metal I was working on. Lowes (not too sure about Home Depot) carries furnace cement, which is rated up to, I think, two or three thousand degrees. I ended up using about four of the little containers in order to completely cover the inside of the bowl and the top. Important note: If you are dead set to repeat this project, make sure that you put a thin layer on the grill and let it dry before applying the next coat. This will take a full night to properly cure, but it beats super heating a semi-liquid trapped just below the thin crust of cement. For those who are not physics buffs, this will cause the aforementioned semi-liquid furnace cement to do the same thing your radiator does on your car when you remove the cap after driving. Hot liquid everywhere.
For an air source, I purchased a hand bellows from Lowes. For my beginning stages, this works fine, but I plan on using a small motorized fan and a pipe to force air in from underneath. Another important note. Do not use any form of galvanized metal!!! Galvanized metal, and piping, when heated exudes a poisonous gas. Only use black iron, this also extends to the metal you are forging. I purchased a three pound blacksmith's hammer from Lowes, a bag of wood charcoal and some gloves. The wood charcoal is important, since regular cooking charcoal cannot get hot enough for forge work. Lastly, there was the anvil. Here is a little info on anvils. If you tap the horn of the anvil with a hammer, if it makes a lovely "riiiiiiiiiing" sound then it is probably steel, if the sound is more hollow, it's cast iron. If you can get a steel anvil, more power to you. They are pricey. Cast iron will work, though won't last as long as steel, for a fraction of the price.
As for the metal, the first few dozen times you try to forge something it will always come out the same, a twisted mess. Don't think that you need to find the perfect bar of stainless steel to work on out of the gate. Lowes sells re bar, and the crappiest piece of re bar (believe it or not) is of a higher quality steel than the best made sword of the middle ages.