The project doesn't end there, either. There are several other entries in the LFS "family" of distribution-building projects, which you can use as the next step up. First and most likely is the appropriately named Beyond Linux From Scratch, which delves into the nitty-gritty of customizing just about every aspect of your newly created Linux distribution. This is where you want to go if you either have ambitions to turn your Linux distribution into something more upscale and usable by others, or if you just want to learn all the more about what goes into your typical Linux distribution (the various X servers, the different command-line shells, etc.)
Hardened Linux From Scratch lets you create a security-conscious version of Linux from the ground up, although the project is still somewhat in flux (in their words, "This book may be broken in some places, but less broken than before.") Cross Linux From Scratch lets you perform the LFS build process using cross-compilation: to quote their example, you could build a Sparc toolchain on an x86 machine, and then use that toolchain on the Sparc to build a Linux distribution entirely from source there. This is probably the most advanced of the LFS projects, and also the one with the narrowest scope of appeal, but still fascinating in its own right and useful if you're trying to build a Linux distribution for some exotic brand of hardware.
Yet another approach to the original LFS construction process is Automated Linux From Scratch, which gives you a high degree of automation for the LFS build process. The way this is done deserves some kind of Nobel Prize for cleverness: the entire LFS book itself is downloaded, and the script commands in the text are extracted and run automatically. This way, it works directly from the most recent version of the book, whatever it may be, and can be used to build any of the LFS projects listed above. Note that this is not a substitute for reading the book; you still need to perform a certain amount of work to prepare the system, and have an understanding of the LFS build process to begin with.
No discussion of creating your own distribution from scratch would be complete without at least some discussion of Gentoo. Like LFS, Gentoo is built from the ground up using source code, not just during the initial setup process but later on down the line: packages can be obtained as source and compiled specifically for your machine's architecture, on-demand. And because of this, pretty much every aspect of the entire system -- the packages used, the optimizations used to compile them, and all the rest -- are at your disposal.
That's both the good news and the bad news. Yes, it means you have the power to configure the entire system from top to bottom, to make it yours in a way almost no other distribution can be fine-tuned -- a perfect tool for rolling your own. It also means you have the power to totally mess things up, or at the very least get stuck at any number of points along the way. Gentoo is definitely for experts only. As a friend once put it, "If you have to ask how hard it is, you probably shouldn't try it." That said, Gentoo can, and is, used as a production environment by the careful and knowledgeable.
The process for creating a Gentoo system is fairly similar to creating an LFS system. First, you obtain one of several possible installation CDs, depending on the machine architecture you're working with. The 32-bit x86 version of Gentoo, for instance, comes on a different CD than the 64-bit edition. (Note that the links from here are to the x86 version of the documentation for Gentoo; you will need to look in a different place for other architectures.)
After booting the CD and configuring the network and installation partitions, you then download what's called a stage3 archive or stage3 tarball. The name "stage3" comes from the fact that earlier versions of Gentoo required that you go through up to two earlier stages of the installation -- bootstrapping the buildchain. The stage3 archive contains everything you need to get started as quickly as possible for your particular machine architecture without having to go through those first two stages.