Before You Begin
Afterthought heels can be used in either top down or toe up socks. The basic idea is to knit to where you want the heel placed. Then, you knit across the heel stitches with a piece of waste yarn. Continue knitting the remainder of the sock. After the rest of the sock is complete, the waste yarn is removed so the stitches on either side of it can be placed onto your knitting needles. Then you knit in the round, gradually decreasing stitches to shape the heel.
Afterthought HeelOne really nifty trick that I have learned over the years is to slide a lifeline into the stitches before knitting the waste yarn and again into the first row of stitches after the waste yarn. Then, when you remove the waste yarn to start the heel, all of the heel stitches are held safely on the lifelines. This makes it easier (and less scary) to transfer the heel stitches onto knitting needles.
See it in Action
If you'd like to make the 'Birch Grove Socks' shown in this video, the pattern is available in my pattern shop.