While searching for a geocache I looked under a log to see if that's where it was hidden. I have found other caches hidden in logs where there was simply a hole bored large enough to hold a pill bottle or some similar tiny object. When I tried to lift up the log the natural split in the wood made the log come apart. I immediately thought that would make a great hiding spot. The technique shown here can be applied to a regular log or piece of lumber.

Supplies

saw
drill
hole saw or Forstner bit
hammer
wood chisel

Step 1:

Since my log had a natural "lid" I didn't need to cut the log lengthwise in order to create a base and a lid. Your log will need to be cut lengthwise with a saw. You can cut it in any proportion you like depending on the cavity you want to create. I don't have any Forstner bits so is used the hole saw and cut multiple holes in the log. Then using the hammer and wood chisel, I chiseled out the bits of wood to created the cavity in the lower half of the log.

Step 2:

You will need to add additional pegs at the ends of the log using a dowel. My log had a limb protruding through the lid which let me align the top and bottom parts. Simply drill a hole the size of the dowel in the top and bottom parts of the log, glue it in one side of the log and align it so that the dowel fits into the other part. This log is for decorative use. That's a gas fireplace in the photo.

You may want to give your log a few coats of varithane to protect the wood if you are going to use it outdoors. It wouldn't hurt to give it coat anyway.