Mix the milk and yogurt together in a glass, pottery or plastic container.(NOT metal) Keep a lid on it, but don't seal it. (sealed starters have been known to explode!) Put this where the temperature will be 80-90F for about 24 hours. Then add the flour and put it back in the warm place for 3-5 days. Stir it daily. It will bubble and have the odor of fermentation. It's ready to use.
A starter is a live thing and must be fed. When you use it you should replace what you used. The amount you should replace will vary according to need. If you use your starter often or you know you are going to have a heavy demand soon, then you can put several cups of milk and flour (equal measures) in it. Generally though you should put in either 1/2 C to 1 C of both flour and milk. I prefer to use buttermilk, as it gives the starter a much stronger sour taste. If you are not going to use the starter for awhile, place it in the refrigerator. It needs to be fed once a week...just a few spoons flour or milk. If you forget and leave it in there for a long time without food, don't just throw it out. Try first to bring it back by adding 1/2c of flour and milk and leave out for a day or so. It is remarkable how these things come back.