The A-frame level is one method of laying out a contour line. It has 2 legs, and a weight hanging from a string in the center. Both legs are at the same elevation when the string lines up with a mark on the horizontal strut.

Here you can see the string lining up with the center mark. This very easy to make at home. Note the improvised weight.

Starting with one stake, you use the A-frame to place another stake at the same level. You then move the A-frame to the new stake, and repeat until you have a whole line of stakes, all at the same level. That is your contour line! You may be able to skip every other stake, especially if you're not digging the swale by hand.

Another method involves two rulers and a length of rubber tubing filled with water (note the caps made of electrical splices).

One person on either end of the device checks the level of the water. When the height of the water is the same on both ends, you have found two points on the contour line.

Closeup of the level. The advantage of this system is that you can find points much further apart, and thus lay out the contour quicker.

Here is the finished contour line.

Now, you dig along the contour line, creating a ditch, and dumping the dirt downhill to create a berm. A ditch on contour is called a swale. This swale will hold water for a short time after a storm: long enough to let it soak in, but too short to harbor mosquitoes. Anything you plant on the berm (fruit trees, perhaps) will have a ready source of underground water, yet be on a slightly raised bed for good drainage. You can put swales all the way down the hill, 10 feet apart and capture a good amount of the water as it goes downhill. Slowing the water prevents erosion, and allows any soil picked up to settle out and stay on your land.