Is there a lot of grading needed? If so, then getting someone in with a Bobcat might be the quickest and, surprisingly, cheapest (and will save your back!). Otherwise, use a shovel and wheelbarrow to move the soil around, and smooth it with a hard rake. Pull out any stones while you're at it. Then borrow or rent a roller to press the soil down. Do this again after the seed or sod goes on. If the yard is quite shady, grass may not take well.
If you want grass, you can either simply plant grass seed (fussy for the first year) or get sod brought in (less fussy, but still demanding). You might want to consider a sprinkler system; they're easier to install before the grass goes in. Consider your local climate, as to whether grass is the best choice, or if something more drought-hardy is more appropriate. I've done some reading on water-efficient gardening (it was work-related) and noted the comment that North Americans typically walk on their grass only when they're mowing it. There are many better ways to utilize a back yard!