Arak can be made a number of ways.
In the village of Merita just outside of Culik, they ferment the sap from coconut flowers on the tree and then distill it in cobbled together contraptions in the village.
It's possible to visit Merita to see this process where the local villagers will ask one of the children to escort you to see the trees where the sap is collected and the older people will show you the still in action. Payment of 10,000 rupiah for the child to show you around is ample. It's also possible to buy arak here for 20,000 rupiah for 600ml. The local people have no idea of the alcohol content, but rest assured that it's well above 50 proof and will have you gasping for breath.
A point of note is that in mid-2009 as many as 25 people died from arak poisoning in Bali due to a factory owner's alleged addition of methanol to the mix. Some of the dead were Westerners and the police shut down many backyard operations as a result. Despite there being further deaths since, things are back in full swing, but let this be a warning that there is no external quality control in the villages and you will be imbibing whatever the villagers decide is OK.