Making plarn (or plastic yarn) from old plastic shopping bags is an easy process that can actually be done in a multitude of ways. I like to use the same method I use for making T-shirt yarn; for an alternative method check out Lorain's plarn tutorial or the spiral cut option at the end of this tutorial.
To start making your plarn, flatten the bag so that the side gussets are folded in and the sides are straight, forming a rectangle with the bag.
Trim off the top of the bag where the handles are and the bottom seam of the bag.
Cut the bag into strips, from one side edge to the other, leaving an inch or so of uncut space at the other side seam, as shown.
It's a good idea to cut strips around half an inch wide, but you can certainly just eyeball them. It's unlikely you'll get all the cuts perfectly straight anyway, and there's no need to fret if you don't.