Business success depends on data - customer information, communications letters for clients and others, tracking invoices, and more. Most larger businesses out there have dedicated employee sections - people who work in cubicles doing data entry and forms processing, and it's the archetypal "just out of high school office job" for most Americans.
However, a lot of smaller businesses also need this sort of work done, but they lack the space (or the demand) to have a full time staff doing it, and this presents an opportunity for the home based worker.
Data entry requires good keyboarding skills (being a touch typist capable of accurately typing at 40-50 words per minute helps), along with the appropriate software (usually Microsoft Word, or something that can create Word documents as an export feature, such as the free OpenOffice suite).
Typical working conditions involve keyboarding for extensive stretches of time; make sure you're capable of long bouts in front of the keyboard before taking this on.
For most home based data entry specialists, there are two ways to go about getting business: Hiring out to a company that contracts that sort of work, or handling clients, billing and accounts receivable yourself. There are advantages and disadvantages to both.
Working through an agency or a 'freelancer' website removes a lot of the overhead needed to run a business, such as getting work and making sure the client pays you. Most of the sites that handle this sort of work act as escrow agencies; the client puts in an amount of work and the payment to do it (plus paying a listing fee), then workers bid for, or take on jobs.
Many of them will even handle taxes for you. The downside is that most are set up as 'low bid' sites - the lowest bidding writer gets the job, which drives the amount of pay you get for the work to a minimum, particularly if they're international in scope.
Working through your own client list requires that you submit invoices and track accounts receivable. On the other hand, you can work with a client directly, and will usually get paid more for this sort of work; you also have to have a ready source of clients.
Most home based workers who do this sort of work directly tend to do specialized sorts of data entry (such as medical transcription, or technical transcription) for companies they used to work for and remain on friendly terms with.
Data entry from home can also be the first step in a career that can broaden out your income potential tremendously. If you do a lot of work with spreadsheets, there's a lucrative market in customized spreadsheets for generating orders or tracking sales for small businesses.
Or your client may offer to give you more business responsibilities outside of data entry as a result of your dedication and attention to detail. Either of these scenarios can help you broaden your skill base and potentially earn you more money.