I use my dehydrator as an incubation chamber. Holds temperature really well, and can be dialed in fairly precisely. And a two gallon container will fit inside, so I can make a lot of yogurt at once.
I used to use the cooler method. For more consistent results, fill it with as much hot water as you can. More thermal mass means it'll hold a steadier temperature. Wrapping the whole thing in a blanket helps, too.