Officially:
Buy
K&N cleaning kit (containing cleaning solution and oil).
Spray with K&N cleaning solution.
Allow to soak.
Rinse from the inside out.
Allow to dry naturally.
Spray evenly with K&N oil.
Allow to soak.
Refit to car.
Unofficially:
Wash it however you see fit. - I'm told Daz brings it up a treat, but bare in mind that it will likely leave an oily black residue on whatever you've tried to clean it in. It might as well be dish-washing liquid if you're going to have to wash a sink anyway.
Let it dry, then coat with some kind of cotton filter oil; I'm not sure it really matters which one.
As a note: K&N say that the filter works best when it's dirty. The trapped dirt helps to close the pores in the filter, thus it traps more, but obviously there's a point when it's absolutely clogged and thus restricting the flow. - I guess what they're saying it that it doesn't need to be perfectly clean to be working, so as a rule of thumb I tend to clean mine when I change the oil etc.
That also makes me wonder how valid some of those "which filter is best" tests are; obviously if you're not testing it under the conditions the manufacturer says are best, it won't perform as well as it could.