ReVerm

A rebuild kit usually contains a piston seal, a dust boot, a new piston, and several copper washers for the brake hose bajo bolt. That being said, a caliper rebuild is just the replacement of those parts (and a cleaning/inspection of the inside of the caliper). If the caliper piston is sticking, you may need to rebuild. If you hear a grinding noise when you retract the piston either by C-clamp or by screwing it in (depending on which end of the car it is), you may need to rebuild. If the caliper is leaking fluid from the piston end, you may need to rebuild. If the dust boot has a hole in it through which you can visibly see rust/dirt, you need a rebuild. Now.

A rebuild kit can be found for anywhere from $25+. The rebuild itself, in broad strokes, goes something like this:

1. Remove the caliper from the backing plate (undo the 2 bolts attached to the backing plate)
2. Remove the brake hose from the caliper (the middle bolt with the brake line attached to it)
3. Plug the brake hose with something (I usually wrap a plastic bag around the brake hose banjo bolt and stick it back in)
4. If compressed air is available, stick the compressor nozzle into the hole for the banjo bolt, put a block of wood (NOT your fingers) between the piston and the other side of the caliper, and force the caliper out of the bore. If you do not have an air compressor and/or you know you're going to toss the piston, you can sometimes get away with sticking a long M8 screw in through the hole for the brake hose banjo bolt and tapping it lightly with a hammer until the piston comes out (only works for calipers where the banjo bolt is perpendicular to the caliper). If you can't do either, you can always force it out using the brake system on the car (reattach the brake hose, bleed the caliper, then engage the brakes slowly without it being attached to the backing plate).
5. Remove the piston from the bore, and detatch the dust boot.
6. There is a little plastic ring inside the caliper bore. This is the caliper seal. If you have a sturdy wooden tool, use it to gently pry the seal out. Don't use a screwdriver, because you might scour the bore (thus ruining your caliper). If you are EXTREMELY careful, you can actually get away with using a soft metal tool such as a manual stapler remover (the ones that come with staplers and look like a spoon) and work the seal out that way.
7. Spray the caliper bore with brake cleaner fluid, let it drip out, then wipe down with a paper towel.

Now, before you go on, you need to inspect the inside of the caliper bore. Is the surface rough, pitting, or severely scoured? If so, you're going to have to replace the entire caliper (sorry). If you see any objects inside the bore, pick them out of there. If the caliper passes inspection, continue with the rebuild.

8. Soak the new seal and piston in brake fluid.
9. Insert the new seal back into the bore. It will just slip in. Make sure it's in by pushing it with a pencil.
10. Now, push the new dust boot into the bore. This will be difficult, as the boot will be at least 2 sizes too big for the bore. All I can say is: persist and use a pencil to reach where your fingers can't.
11. Pour some brake fluid into the caliper bore and swirl it around a bit. If you have caliper grease (expensive and hard to find), put some on the piston now. If not, lubricate it with brake fluid.
12. Push the new piston back into the dust boot (and consequently, into the bore). If you think getting the dust boot back in was fun, you'll really enjoy this. The caliper is barely big enough to fit inside the bore, and the upper end of the dust boot is one size too small for the new piston. DO NOT force the piston in if the dust boot isn't completely around it. I made the mistake of doing that just recently and managed to tear off a piece of the new boot and get it stuck in the bottom of the caliper bore (which meant another rebuild). If you cut up a large, hard plastic cup and use it kind of like a shoe horn (piston horn?) to guide the piston in, it will make the job much easier. Once again, persist. Eventually the piston will go back into the bore and boot.
13. Put the new copper washers on the banjo bolt and screw the brake hose back in. Reattach the caliper to your car and bleed your brakes.
14. Test your brakes, make sure they function properly and do not bind/drag. If the calipers test without any problems, take a nice hot shower and get a nice cold drink. If not, take a nice hot shower and look at the caliper again later.

There are better how-tos out there, many of which include photographs. Consult them as well before you go out and do this. If everything goes smoothly, a rebuild will take an hour. If not, it will take you several. Also make sure you know the basic quirks of rear disc brakes (like the fact that you have to align the notches of the piston to match with the protruding thing on the brake pad backing plate), as it will save on confusion later.

I know this seems overwhelming and scary, and to some extent, it is. But if you go out there and look for how-to's on how to do this right, you'll see that it isn't that bad at all. Good luck!

__________________
Captain Slow.