Funeral Prayer - Method (Ahadith 1116 - 1118)

Volume 2, Book 23, Number 417:
Narrated Abu Huraira:
Allah's Apostle informed about the news of the death of An-Najash on the day he died. He went out with us to the Musalla and we aligned in rows and he said four Takbirs for An-Najashi's funeral prayer.
Volume 2, Book 23, Number 418:
Narrated Jabir:
The Prophet offered the funeral prayer of As-Hama An-Najash and said four Takbir.
Volume 2, Book 23, Number 419:
Narrated Talha bin 'Abdullah bin 'Auf:
I offered the funeral prayer behind Ibn Abbas and he recited Al-Fatiha and said, "You should know that it (i.e. recitation of Al-Fatiha) is the tradition of the Prophet Muhammad.
In short:
  1. Takbeer (saying Allahu Akbar)
  2. Surah al-Fatihah + any other surah/ayaat
  3. Takbeer
  4. Durood (sending salutations to the Prophet (SAW))
  5. Takbeer
  6. Making du`a for the deceased
  7. Takbeer
  8. Pause - Tasleem (saying assalamu`alaykum wa rahmatullah) to the right (only)
For a detailed description (and the du`a for the deceased), go through this link.