Don and his dad got started on the process of making the floors on the first floor level this weekend, so I had them explain it to me (twice) so that I could explain it to you folks. The first step, of course, is to have some fraternity boys come rip out your floors for you.
Once you are down to the joists, you need to acquire some string. Take the string and use a line level to secure it above your first joist in a level position. You may have to do some triangulating to do this; Don tied one end of the string on the far wall, then took it diagonally over to his first joist in the center of the room and lined it up, then strung it diagonally all the way over to the near wall of the room (yes I know that's not really what triangulating is, I couldn't think of a better word). Just drive a nail in wherever you need an end of the string to be, and tie the string around it. And don't forget to put your line level on before you tie it off. Then you can fiddle the string up and down on your nails until it's level.
The next step is to "sister" your first joist. Sistering a joist means that, rather than removing an old, unlevel joist, you take a new one and put it in right next to the old one, attaching the two together for lots of support. Obviously, you use your now-level string to determine the level position of the new joist. Once you've gotten the first joist in, you can use that to determine the level of the next joist.
That's a fairly simplistic explanation of a slightly complicated process, but that's basically how you do it.
How you navigate your way across the open joists that now comprise your only floor is, of course, up to you.