Basically what you're doing is adding two strips of molding in from the crown molding and then tying them together with paint to fool your eye into seeing it as recessed.
First, decide how far in from the wall you would like to install your molding and snap a chalk line on all four sides to mark the locations.
Measure those lines so that you can cut your molding to size.
You want your corners to be mitered. I'm using a compound miter saw to help speed up the process. But a simple miter box and saw would work just as well. Once all of your molding is cut to size, you're all set to install it.
A buddy to help hold the molding in place while you nail can be a big help.
First place some glue for molding and trim on the back side of your molding and put it in place along the chalk line. Install the nails about a foot apart all the way along the length of each run making sure to nail at an angle to secure the molding to the ceiling.
Once that's finished use a little spackle to fill those nail holes and any gaps where the joints meet.
Finally, paint it out in a trim color or any other color you'd like to make sure that your moldings look seamless and to recess the center portion.
A great look for a fraction of the price! I'm Mrs. Fixit and it's just that simple!