I first heard of this wonderfully fun and beautiful way to transform clothing in this book, The Creative Family by Amanda Blake Soule. http://amandasoule.com/book/. I tried it immediately and loved the results. The other day I pulled out my trusty freezer paper and fabric paints and got to work. There are way too many stained shirts in my children's drawers, I had to do something! The Artful Parent, one of my favorite blogs, has a great post on freezer paper stencils right here--http://artfulparent.wordpress.com/2008/05/10/freezer-paper-stenciling-so-fun/Everything you need to know to do this is there.
This is really more of an adult or older child project. I do not recommend doing this with your little one, rather FOR your little one--or for yourself. The paints will obviously stain clothing and you certainly don't need to teach a 4-year -old how to use an x-acto knife just yet.
The seahorses came out really well, very crisp lines and a cute image. I did cut out 2 stencils. I have not tried to reuse a stencil, something I should try. The wheels on the dump truck ran a bit. I plan to touch them up. In my experience, bigger less detailed images work best. I find my images using google images. When I was looking for a seahorse image I typed "seahorse silhouette". Then enlarge the image you find and print. Then all you have to do is trace the image onto the freezer paper (no "I can't draw excuses!). It is also important that you use a sharp blade. Send me pictures if you do this! I have a few more to do. I will post them as well as the touched up wheels some time soon.