Pictured above is the most common type of tip-up used ice fishing and cost anywhere from $5.00 to $10.00 in any sporting goods store. The horizontal sticks sets over the hole and the spool that holds the fishing line sets in the water under the ice to keep it from freezing. There is a wire trigger that runs to the spring wire that has the flag attached that holds it down until a fish strikes, this releases the spring wire and allows the flag to pop up letting you know that there is a fish on.
 The spool is free spinning so if a fish runs after hitting the bait it will feel no resistance, causing the fish to spit the bait. This is a good setup for pike, trout, walleye and perch and is the type I use most of the time.
 To setup this type of tip up you tie a hook to the end of the line placing a small split shot about 12 inches above the hook. Use only enough weight to carry your bait to the depth you wish to be fishing.
 Now you clip a depth finder to the hook (merely a lead weight with a spring clip on it) and drop it in the hole, allowing it to go to the bottom. Then you raise it to the depth you wish to fish at and mark the line at the spool with a small split shot so if you have to re-bait you already know how much line to run down without having to measure the depth again.

 Here is a simple tip up you can make for pennies and it works well in most cases. It consists of two 1"x4" boards, two nails and fishing line. The vertical board is pushed into the snow and the other board is balanced in a cut out section so the end with the  fishing line attached is higher than the end painted red.

 Set up the line the same way you would for the other tip up and when a fish hits the lower end of the board will rise showing a fish is biting. This type doesn't allow the line to play out so you have to keep a close eye on it or you will miss the strike! It does work well though and you can make quite a number of these for very little money.
 I use minnows mostly when fishing tip-ups but you can use about any kind of natural bait you wish. Lures are not effective on these due to the fact that they will impart no movement to the lure so there will be no action to attract fish to hit, although there are tip ups that will bob your bait up and down due to the wind. I hear they are effective, but haven't tried them myself.
 You can also make a cover to place over the hole to keep the light from shining down into it. This will some times spook the fish and keep them from hitting when fishing in shallow and/or clear water. A piece of cardboard with a slit in it to slide over the tip up works well and is easy to come by. There are tip ups that cover the hole and they work very well, but they are a tad bit more expensive. If price is not a concern then by all means get a couple of these. They are nice if the wind is up , they will not tip over if it is windy because of their low profile and rarely do they give you a "wind hit".