This is a pic of the last batch I made. I'm on my third batch now.
Everybody does them differently.
I tend to make the backgrounds as one large sheet, cut that up and make each inchie individually. Other people make one large sheet of finished art, then cut that into squares.
The pic link shows inchies made of painted silk. I paint the silk and really like working with it. It glues like paper for collage and it sews like a dream for fabric and mixed media pieces. I tend to do either all fabric--the painted silk, all hand drawn/hand painted, or mix the two with other small embellishments for mixed media.
I started out in the LMAO community doing ATC's. I still do them, but I really love the inchies too. The inchies were intimidating when I got a good look of just how small they are. What that means for me is that I either rise to the challenge or fail miserably. I think I have enjoyed success and have a lot of inchies still in me. So many techniques to learn and try.
Not everyone is as AR and OC as I am. It helps to have those character traits to lend one to do the detailed work. But, it is not necessary and maybe there are artist here that work more freely and loosely than I do. I can really learn some lessons from those people, believe me.
I can only encourage people not to be intimidated. Try different approaches. There are some exquisite inchies at flicker that are very inspiring. Go see what other people do. Then do some of your own.
I would certainly participate in an inchie swap here if one is set up.