Just like knee raises except you keep your legs straight. This requires good hamstring and lower back flexibility, see the Stretching FAQ for details.
Although Legendary Abs recommends these, The American Council on Exercise's Aerobics Instructor book warns that they have the same back problems as conventional situps. This makes sense since, like situps, the legs are kept straight and the hips move. The Aerobics and Fitness Association of America (AFAA) also regards hanging leg raises as dangerous.
For safety you should probably stick to leg thrusts and knee raises.
If you do do hanging leg raises, make sure your lower back stays neutral or rounded.
There is an isometric variant done by gymnasts called the "L-Support", which basically consists of taking the leg raise position with the legs held straight at a level just above the hips. The position is held for 10 seconds. When you can complete this easily, try a higher position. The same cautions about back position still hold.