I cut watercolor paper 1 1/2" wide x 6" tall, glued a piece of fabric to the back with fabric glue, then I glued smaller pieces on the front, overlapping a little. I didn't use a lot of glue, I was just using it to tack the fabric down so the pieces didn't slip when I went to sew them. The first few I made I didn't glue the front fabrics down (just the back), and they slipped all over the place and looked yucky. So glue 'em down, then sew all the way around and over the bottom of each little piece. Then punch a hole near the top, add an eyelet if you want, and thread yarn or ribbon through the top. The edges will fray a bit, but I think it adds to it, don't you?
Another cute fabric bookmark tutorial can be found here on Anna Maria Horner's blog.