Fold a kitchen towel so it creates a thick nest and the coconut sits on top. Position the coconut so its “eyes” (the three holes) are facing up. Place the tip of the screw driver or other sharp pointed item into one eye, and use the hammer to tap the screw driver through the eye, swiveling the screw driver as you remove it to make a bigger hole. Repeat this with the other two eyes, then tip the coconut over a bowl and let the water slowly drain out. Strain this through a fine strainer, and pour into a glass jar. Refrigerate it and use it later for cooking, baking, or drinking.
Now place your coconut back on the towel, or on the floor. Use your hammer and whack around the coconut in a circle repeatedly. I find it really helpful to use a hammer with points on the end. I actually use a meat mallet and it works great. Be patient and just keep whacking the coconut in the same circle -- after 15 to 20 times around, it should crack into two halves.
Once the coconut is broken in half, give the halves another couple of whacks to break them up.
Now use the tip of your knife or the end of your screwdriver to pry the meat away from the shell. It should pop off pretty easily.
If you want to shred your coconut, or plan on using the leftover meat for baking (more on that below), you'll want to peel it. Using a vegetable peeler, peel away the brown skin from the white meat. If you're only going to make coconut milk, though, you can skip this part.
Place a fine mesh strainer over a large, high-sided bowl. Place a super-thin tea towel or cheesecloth over the strainer.
Now add half the coconut meat and 3 cups water to a high-powdered blender or food processor and blend until the coconut seems "shredded" and the mixture is milkshake-like. Pour the mixture right on top of the cheesecloth and then gather the cheesecloth by the ends. Squeeze the milk out into the bowl until you feel like all of the milk has been squeezed out of the coconut. Either discard the shredded coconut left in the cheesecloth, or save it and add it to baked goods; if you want to swap it in for regular shredded coconut, dehydrate it in a low oven (or dehydrator) until it's dry, about 6 to 8 hours.
Place the cheesecloth back over the strainer and repeat with the remaining coconut and 3 cups of water.
Once all the coconut milk is in the bowl, you can whisk in the vanilla extract if desired. Pour the coconut milk into glass juice jars and refrigerate for up to 1 week. Be sure to shake the milk up before drinking, cooking, or baking.