How should I add 120V service to an outbuilding?
No, you cannot use the ground as neutral. If you want two circuits, you'll have to use four conductors (hot, hot, neutral, ground).

If the run is short enough, you can use 12 AWG copper conductors instead of 10 AWG.  Depending on the loads, 12 AWG should be good for between 50-100 feet. If the run is longer than that, or you'll have larger loads in the garage. Then you might want to go up to 10 AWG copper, to reduce voltage drop.  

You'll want to install a 20 ampere double pole GFCI circuit breaker, to protect the multiwire branch-circuit.  Even if you end up using larger conductors due to voltage drop, you'll still only install a 20 ampere breaker.

Other Points:


You'll have to install a disconnect at the outbuilding.  
If you install a feeder rather than a branch-circuit, you'll have to install a grounding electrode system at the building, and bond it to the grounding conductor of the feeder.  
The feeder/branch-circuit will have to be wires/cable rated for outdoor/wet locations.
If you think you might need more capacity in the future, you may want to install larger conductors and a secondary panel to accommodate future needs.