My dad made biodiesel for a few years to run an old Rabbit and TDI Jetta. There are two routes you can take:
Biodiesel - You start with used vegetable oil, filter it, add some chemicals, and end up with fuel that will run a diesel engine with zero modifications. You also get glycerin as a byproduct, which can work nicely as a cleaner. Notes: Seems less willing to start in cold weather, he usually used a 1:1 biodiesel/diesel mix. Exhaust smells like chinese food (or w/e they cooked in the oil).
Pure oil - With modification, you can run pure vegetable oil in a diesel engine, again the typical source is filtered used cooking oil. From what I understand, you basically just need to install a fuel line heater (I believe just to bring down the viscosity). I don't think you have to do anything else, but I haven't seen it first hand so I could be wrong.