I fantasize about this constantly.

To be up and playing games you need:
Display device- TV, PC monitor, Projector, whatever
input device- buttons of some type. They don't have to be arcade buttons. Joysticks are not needed. Many arcade games play just fine with a buttons only interface.
wires- time to scrounge around and cut the cords off some old stuff.
guts- any old game system will do. A computer would be best, but a PS2 would also work nicely.
controller- hack up a controller.
a cabinet- Saw up coffee tables and countertops. You can even turn the one in the kitchen into a cocktail if you cut its legs in half!