Print a photo on fabric paper. (I edited mine in picnik.com, so I could add the year and the holiday border.) I printed this one at 4" x 6" and kept 1/4" of the white border when I cut it out. Peel the paper off the fabric.
Cut your background fabric the same size as your photo.
Pin the fabric pieces right sides together. You should see the "wrong" sides of the fabric on both sides.
Very lightly hot-glue your cord or ribbon on the top evenly spaced apart, inside of the photo fabric piece. This is how you'll hang the ornament.
MAKE SURE you're ribbon or cord is tucked inside the ornament! You should not be able to see it anymore when you go to sew.
Using a 1/4" seam allowance, sew all the way around with your sewing machine. Yes, you are sewing it shut.
Using small scissors, cut a 2 inch slit in the back of the fabric side, not the photo side.
Turn it inside out and stuff it just like you would a pillow. (Note: I wish I had stuffed mine a little more. If you stuff it nice and tight the picture doesn't distort)
Using a needle and embroidery thread, sew the slit shut.
Cut 1" x 2" inch strips of fabric and batting.
Make a sandwich with the batting in the middle, and sew an X through the whole piece.
Hot glue the fabric sandwich over the slit that you sewed shut, and sew a cute button right in the middle. Your done!:)