In 500 words or less.
1) Have strict criteria. Either your dog meets your criteria or he does not. If you do not know what your criteria are, your dog will not succeed. Do not reward your dog if the criteria are not met. Either lower the criteria if you asked too much, or try again. Either way, do not reward the failed attempt. To earn a reward, the work should be difficult enough that the dog must concentrate to succeed, but not so difficult that he gives up. If you start when your dog is very young, working hard and with engagement becomes a habit. Remember, positive is not permissive; good positive trainers have precise criteria.
2) Raise your criteria quickly and systematically. If you spend a full month doing three steps of heeling followed by a reward, your dog is going to be confused when you shoot for five steps, because she has been led to believe that the exercise is three steps. To keep your dog thinking, raise criteria quickly. Bob Bailey says at 80% success, raise criteria. Works for me.
3) Mark correct behaviors instantly and reward the dog in the correct position. As soon as your dog's head is in exactly the right position for the period of time you desire, click or use your marker word. Then use your motivator as close to that exact position as possible. If you watch Lyra's heeling, you'll see how hard I try to get the food down to her as close to heel position as possible, unless she is forging (in which case I feed slightly behind heel position) or lagging (in which case it would be slightly ahead of correct position).
4) Each step you take should be tailored to the needs of your dog, and should force your dog to put out effort in order to earn a reward. Lagging dogs should work to the right (right turn, about turn, fast, or right circle) - no effort equals no reward. Forging dogs need a reason to stay back in position (toy from behind, slow heeling, right turn with a halt, etc). Make sure your shoulders are facing the same direction as your feet; no looking back!
5) Give 100% to your dog. It's not fair to ask the dog to give you perfect attention if you don't bother to give it back. Be interesting and completely engaged when you are training. Personally, I'm a lot more likely to look at someone who smiles, talks nicely, walks in an interesting fashion and gives me complete engagement. Your dog appreciates this as well.
6) Celebrate with genuine enthusiasm when your dog exceeds your criteria. They notice the difference in your attitude.
7) Keep heeling sessions short. It's a lot more fun and prevents stress build up.
8) Build your dog's love of the motivators you wish to use. You can't use toys if your dog doesn't want them. Early on, make a point of developing all of your options; from food to toys to personal play. Dont' use them in training until your dog cares about earning them.
It's not as hard as people think to start beautiful heeling. The hard part comes later, when there is no leash (if you use one) or motivators.