Since I've been riding the bus & using my headphones a lot more lately, the tangling was starting to bother me. I saw this cute post (Contemporary Farm Girl) & I finally tried it out. It really keeps headphone from tangling! I'm very happy with it.
The original post has a great video showing the process.
I used 3 skeins of embroiderer floss (I used 3 colors I liked together)
Another post with great instructions is on Apartment Therapy.
This process does take a few hours, but what's great is you never have to spend the time de-tangling them again. I used Fray Check at the ends to prevent unravling instead of the elmer's glue or nail polish, but I image those would work well too.