New Mexico green chiles have a very tough skin unlike their Jalapeño relatives. For this reason, it is necessary to peel them before using them in any recipe, even a simple salsa.
The most common and best method of peeling is to roast the chile first. In New Mexico, chiles are roasted in large rotating drums over very hot propane flames. Since most of us don't have access to a chile roaster, we need to make do with a common barbeque grill -- either gas or charcoal.
To roast your chiles you will need a very hot bbq fire, tongs, a damp dish drying towel, and a large pot.
Begin by lining the bottom of the pot with the dish towel. As the chiles come off of the grill you will throw them in this pot and them cover them with the damp towel. This has the effect of steaming them somewhat and making them even easier to peel.
Using a sharp knife, puncture each chile. Then put them on the grill, turning frequently. As they roast the skin will turn whitish and then blister. If continued long enough, it will char. A little charring is OK, a lot of charring with overcook the chile. The proper amount is that which, when you remove the skin, leaves the chile meat a nice green. Overcooking results in a more yellowish or brown color.
After roasting the chiles, throw them in the pot and cover with damp towel for ten minutes or so.
You may now freeze the chiles for later peeling and use, or peel them now.
If you have sensitive skin, wear rubber gloves for the next step.
Simply peel the chiles by hand. The skin should come off quite easily. After peeling, cut the stem off (maybe 1/2 inch of the stem part of the chile), slit the chile down its length, and remove the seeds and membrane. The chile is now ready for use. You will typically chop it for such recipes as salsas, green chile cheese burgers, and green chile stew. For chile relleños, don't cut off the stem and just put a small slit in the side near the top to remove the seeds and insert the stuffing.
All of this sounds much more complicated than it is. Just try one or two until you get the hang of it. They aren't that expensive!
Our Taos home page has two green chile recipes.