There are many ways to dig a giant hole, although by far the most impressive is by detonating a nuclear explosive underground, as this video proves.
While an above ground explosion would probably also produce a crater as the top layers of soil are vaporized, the result is unlikely to be quite as satisfactory as much of the energy will be directed upwards. However, by burying the explosive beneath the surface, the soil above traps some of this energy, forcing it to become directed downwards.
This subsequently causes the earth beneath the bomb to become compressed, while most of that above it is displaced by the force of the blast, causing a massive hollow to develop beneath the surface.
This produces the trippy effect seen in the video, whereby the ground seems to just collapse in on itself.
While this might seem like a somewhat indulgent way to create a hole, it has actually been used by the U.S. Department of Energy on several occasions to open up craters in the ground for use as storage bunkers. Depressions made using this technique are known as subsidence craters, one of which can be found at the Area 3 Radioactive Waste Management Site, as seen in the video below.