How do you do street photography?

First rule: ask! It is bad manners and in some places, illegal, to shoot people without their knowledge or permission. It is OK to take them if they happen to be in your scene, but that's not the same as taking individuals. Second, a small camera with a wide-angle lens is better than a big SLR with a telephoto lens attached. That calls attention to itself way too easily. Also, a tele or a tele-zoom has a "narrow angle of view". In other words, you have to point it staight at your subjects, and they can't help but know you are photographing them. I am not advising you how to get around rule 1, here: but if you want natural, unposed shots, aiming a telephoto at someone is not the best way to get them. A wide angle lens will capture the surroundings and give context to the picture while including people not directly in front of the camera. My article on the subject at www.qassia.com/street-photography might be worth a read.

Shooting from the hip is quite difficult. You have to be good at estimations to be able to frame a certain scene. You could buy an SLR camera then buy a zoom lens. That's less intrusive but more expensive.