I've been inspired by Craftster for a long time and thought I should really contribute something - let me know what you think!
These are made with panels from #6 plastic containers - these are the containers that things like berries or deli items come in. There will be a little 6 in the Recycle triangle thingy - so you know you got the right type. Take it from me #1 doesn't work.
To start, you take your container and cut out the top and bottom. I tried using the sides and they warped really unpredictably - so I don't recommend using them. Clean the pieces of plastic and remove any labels - use rubbing alcohol and a soft cloth to get the sticky residue off.
Using a permanent fine point marker like a sharpie draw your design onto the the plastic. I just traced an image out of a clipart book. Remember to keep your design fairly simple so that you can still tell what it is when it's tiny!
Sand the back of the image with a fine grit sandpaper. Make your sanding scratches in all different directions so it is nice and even and frosty looking. Then use colored pencils to color your image. Next, trim out your design to whatever shape and punch holes if you are going to use is as a charm. I used a 3/16" punch and it made a hole just big enough for an embroidery needle or jump ring to go through.
Shrink it! I used my embossing gun to shrink these (but you can also use an oven). Make sure the surface you are working on won't get damaged by the heat gun. Delicately hold your piece with a wooden skewer or some other long handled non-meltable implement so it doesn't blow away while you're shrinking. Keep the heat gun moving around and try to heat the entire piece evenly. Once it stops shrinking, let it cool and seal it. I used a gloss varnish for oil paintings - but you can use whatever you like. Just make sure it doesn't dissolve or smudge the pencils and marker before you apply it!
I also posted a tutorial on my blog with more photos http://papertart.blogspot.com/2008/11/how-to-make-plastic-shrink-charms-from.html
Now go dig through your trash (or recycle bin) and make stuff.