I used to make a lot of my own punk rock patches. Here are some tips and ideas.
I always use fabric paint to make patches. My favorite brand is Tulip Soft Washable Fabric Paint. It's thick and you don't need many coats to cover up dark fabric. I've also tried to use puffy paint, nail polish, and white-out, but they don't work very well. Puffy paint is too thin when you brush it on, and nail polish and white-out will soak into the fabric and cause problems.
The best type of fabric to use for patches is canvas, or anything that is thick and not very stretchy. You can get it at a fabric store or cut patches of fabric out of old clothing. Weird prints like plaid, stripes, and polka dots can also be used to make patches.
If you can't draw or paint very well, you'll need stencils. You can buy a pack of simple letter stencils from a craft store or you can print and cut out your own band logo stencils. (StencilPunks.org has a great selection) To make stencils that don't fall apart, print them out on a regular sheet of paper, then tape or glue the paper to a piece of cardboard or something else that is thick enough not to rip easily. Then cut out the stencil with scissors or a razor blade.
Spraypaint is a quick and easy way to paint over stencils, but first test the stencil a couple times because it might bleed into the wrong areas of the fabric. It also doesn't last as long as fabric paint.
Iron-On Transfer Paper
This is a really bad way to make patches or t-shirts. It seems like it will work great, because all you do is print out your image on to the transfer paper and iron it on, but they don't last very long. If you do use them, you should only iron them on non-stretch fabric (not t-shirts) and add a coat of clear spray paint so the image won't chip off as fast. Transfer paper should cost only a little over a dollar a sheet.
I've never tried screenprinting, but if you want to learn there are lots of other websites that can show you how. For a screenprinting tutorial, click here.
Stencils and paint can also be used on your purse, boots, backpack, furniture, walls, clothes, etc.
The Conflict patch stencil was printed out from StencilPunks. The Rancid patch made with no stencil, and I used nail polish for it, which was a nightmare! Fabric paint for the Misfits pants mixed with glitter. The Virus patch was made by my friend Casey and the bottom Rancid patch was made with separate letter stencils. The Operation Ivy patch was sent in from Kevin.
The Aus-Rotten and Dead Kennedys logos were done freehand, for the rest I used stencils. The first Lower Class Brats picture is a skirt that I painted with white puffy paint, and it didn't show up very well. The second LCB picture is a t-shirt that I made a while ago with an iron on transfer. It started to disintegrate off of the shirt, and I couldn't wash it anymore so I stopped wearing it. The second Unseen picture is my high school backpack. School can be pretty boring if you don't have any sharpies.