I've seen this project done over blogland and decided to try it out too. Actually, I have a good friend who is moving away and I wanted to do something personal for her. She taught me how to sew my first baby blanket and I saved some scraps of material from the blanket and decided to make some magnets out of it. You can use all kinds of materials for this, but what I used were the following.
Marble beads (can be found at any craft store or the dollar store)
Step 1: Trace with the pencil around a marble onto the picture (fabric or scrapbook paper).
Step 2: Cut it out.
Step 3: ModPodge the back of the marble and stick on the picture. Squeeze out excess glue.
Step 4: After the glue dries, cut out magnet and stick to back of picture.