Run eclipse.exe
Press OK to the workspace dialog (it creates a "workspace" folder in your user directory)
On the "Welcome" screen, click the far right button
Choose Help->Software Updates->Find and Install
Select "Search for new features to install" and click Next
Click "New Remote Site..."
Set "Name" to "PyDEV Plugin" and URL to "http://pydev.sf.net/updates/" (without quotes)
Click OK
Make sure there is a check next to PyDEV Plugin and click Finish
Wait for the update manager to check for PyDEV
In the new dialog, place a check next to "PyDEV Plugin" and click Next
Accept the license agreement and click Next
Now click Finish
Let it download the PyDEV plugin
In the Verification window, hit "Install All"

Now we have to setup some configurations for PyDEV
Choose Window->Preferences
Expand the Pydev category
Click "Python Interpreters"
Click "New..."
Navigate to your Python install folder and double click "python.exe"
Click OK in the "Selection Needed" dialog
Click OK in the Preferences dialog

To start a new Python Project, click File->New->Project...
Expand the "PyDEV" category and choose "Pydev Project"
Enter a project name and click Finish
Viola! A clean Python project in Eclipse!

To create a file, go to "File->New->File".
Select the src directory
Enter a name for the file (main.py is good for the first file)
Click Finish

To compile a project, click "Run->Run Last Launched"
In the configuration dialog that opens, click the "Python Run" category and then click the "New" button at the top
Set Name to something that describes the configuration (PROJECTNAME Config works)
Set Project to the name of your project
Set Main Module to the path of the file you created (main.py)
Click Apply and then Run
NOTE: You must create a new configuration for each new project

Each time you want to run your application, just choose Run->Run Last Launched or right click the project name on the left 

and choose Run As->Run

NOTE: All source files should go in the "src" folder. Files such as "README", "INSTALL", etc should go in the project's root 

directory (with ".project")