A vocab bag is something that was fairly fashionable a few years ago. I think it's a shame they aren't used as often nowadays as they provide a great way of reviewing vocabulary and are a good source of activities, warmers and fillers.
To start up a vocab bag, you need a large envelope, bag or any container for slips of paper. Cut up squares of paper - approx 5cm square- and keep them together with the bag. During or shortly after the lesson, you write down any new vocab that comes up: one item per square of paper. You can include information about the word; for example whether it's a noun, adjective etc. You could also include the phonetic script, if you want. You could also appoint a student who notes down all the words during the lesson, this should be a different person each lesson. You need to decide whether to let the student choose which words to note down or whether you will indicate which to include in the vocab bag.
You can start incorporating the vocab bag into classwork immediately. You could do a warm-up activity where you test students on the spelling of the words in the bag. You could give the definition and they provide the word, or give the word and the students give a definition and / or make a sentence. You could introduce an element of competition into these activities. If you have five minutes at the end of the lesson, you can do work with the vocab bag. If some students finish before their classmates, you can give them the vocab bag to work with independently. They can test each other for spelling, etc. The vocab bag can also be used for quizzes or almost any game you can think of.
The beauty of the vocab bag lies in its simplicity. Once you get it going, it's easy to continue. It's good to use it regularly to keep up the momentum and interest. Vocabulary is recycled; rather than studied one lesson, never to be seen again. Depending on your classroom situation, you can choose to leave it in the room, or not. If you choose to do so, students who arrive early can be encouraged to work with it while waiting for the lesson to start.