Web directories, (also known as link directories), are essentially just a collection of links to web sites. Directories can be stand-alone, or part of a larger website. The links are often sorted by category and will have a description of the site alongside. Webmasters can submit their site for inclusion to the directory. Sites can be included for free, or may require a reciprocal link or cash payment. This is at the discretion of the directory operator.

Those who create directories can benefit in 3 ways.
1. Traffic to their site/directory.
Webmasters will visit the directory to submit a link to their site. New directories will have trouble getting visitors to pay for a link to their site, so giving free links may be the only way to attract visitors initially.
2. Reciprocal links
If your directory is more established and indexed in the major search engines, you can try asking for reciprocal links (link back to your site). This may eventually result in your directory ranking higher in the search engines and having a higher PageRank. PageRank is essentially a way that Google measures the amount and quality of the incoming links to a given website. (Visit Google for more details).
3. Cash
If your directory has a higher PageRank, a good reputation , high traffic, or is popular in a certain niche, you may be able to charge for submissions, or charge to review a site for possible submission. Webmasters know that being included in certain directories may improve their ranking in search engines.

The most basic directories are written in plain HTML and can be made with an editor program like MS Frontpage, Dreamweaver, or even a basic text editor like wordpad.
More advanced directories are generated dynamically and often require the use of PHP scripting and an available database like MYSQL on your webhost. The scripts are available at a cost, but their are also a few quality directory scripts availble for free. Just do a search for 'free directory scripts' on your favorite search engine. Make sure your webhost meets the requirements for any script you plan to install.

A good way to promote your new directory is to join a webmaster forum. These will often have a section where webmasters can announce or promote a new directory.

Of course this is up to you! But here are a few questions to ask yourself.
What is the goal of this directory? Making money?, Increased traffic?, Hobby?
Will visitors find this directory useful or will it be just a random collections of links?
Will search engines value links from my directory?