This is a topic that I don't know too much about, however I will tell you what I do know:
The cocoons most likely have the chrysalis (pupa) in them
the cocoons will most likely have to be degummed to remove the sericin: the gluelike substance that the caterpillars use to stick the silk together
The cocoons will then have to be reeled or stretched; stretching seems more practical.
Michael Cook has a great website all about sericulture (raising silkmoths): http://wormspit.com/
He also has a yahoo group dedicated to silk and silkworm raising: http://groups.yahoo.com/group/CatHerders/
Take a look at the "degumming" and "mawatas or hankies" pages on the silkwork portion of the wormspit site.
Once you get them into hankies, you can spin the hankies into yarn. There are tutorials online for spinning from hankies, and it's actually an relatively easy way to get started spinning since you predraft from the hankie before spinning.
Knitty: How to spin silk hankies
Youtube video on spinning hankies