I just finished drying a batch of basil last night, so it is perfect timing for this post! Drying basil is so darn easy. I am a bit embarrassed that I ever purchased it.
First, harvest your basil. Remember 10 & 10 when harvesting. Don't start harvesting until the plant is at least 10 inches high and then again no later than 10 days later. According to Organic Gardening magazine, the more you harvest, the better the flavor. Also trim just above the second set of leaves so that you'll get new stems and more leaves.
Rinse the basil and pinch the leaves from the stems. Place leaves on a tea towel (I place a plate underneath the towel so I can move it around). Set outside in the sun or in a warm, dry place inside. Stir the leaves daily. Dry completely - the leaves will be delicate and crisp - about 3-5 days.
I use an herb mill for chopping the dried basil, but you can also use a rolling pin or just your fingers. Store in an airtight container. I actually like to store mine in small canning jars, but couldn't find any extras last night. Save for later in the year when you can't walk outside to snip a little sprig of basil!