I'm pretty sure that the biggest problem with real traditional stinky tofu (chou doufu) is that the tofu is aged a certain way, and my guess is that unless you are in China it will be almost impossible to get the proper tofu.
Once you find the tofu it's pretty simple, just deep fry the squares of tofu until they turn golden brown, then serve with chili sauce.
NOTE: WARNING: CAUTION: ALERT: Stinky tofu is especially stinky during the cooking process, imagine deep frying bleu cheese or something along these lines. When I'm walking down the street it's possible to smell it blocks away, so cooking it in your house without good ventilation is, well ..., bad.
The Red Chef - Shanghai, China
Kung Fu Eats