Check this out:
http://www.craftster.org/forum/index.php?topic=301135.0
(Or if my crappy internet skills are sucking as much as usual, go to craftster, search Watercolor Stencil Portrait + TUTORIAL by weighanchor.)

Basically, you get some art paper, a set of watercolors, and a jar of a little craft supply called masking fluid. Then you need photographs of friends or family (or whatever else--my first one was a copy of a weezer poster for a friend who loves them). You need to manipulate the photographs on your computer to get a really clear black and white pic. (Many more details about this step at the location above). Once you've got a good pic, you print it out, slap it up against a window in sunlight (or a 9x13 pyrex pan with a light underneath it) and put a sheet of your nice art paper on top, and, looking through the paper to the pic underneath it, paint the white parts of the pic onto the art paper with masking fluid. When your masking fluid dries, you paint over it with the watercolors (two colors close to each other on the color wheel work well) in a pleasing way. Then you wait for the paint to dry, pull off the masking fluid (it peels up- an eraser makes this process easier), and voila! These portraits are incredibly beautiful when finished (as long as you are painstaking and patient when making them) and make you look like a total artistic badass. Seriously. This particular craft is not SUPER cheap (ie; free), but the supplies should make quite a few gifts, and the dollar store often has watercolor sets that will work just as well in this project as what you'll find at any craft store.

On another note, something I've been thinking about doing this year for my brothers and sisters are handpainted wooden recipe boxes with favorite recipes from both my Mom's and my kitchens.

Yay, I love making gifts for people! Last year I did crocheted hats and/or scarves. As other people here have been saying, those are a big hit.

Another great one I did was homemade soap. There are a lot of fun recipes here:
http://www.teachsoap.com/recipes.html

or if you make clear soap like this:
http://www.millersoap.com/glycerinsoap.html

then you can put a little plastic toy in the middle for added excitment. I suppose you could put a toy in the non-clear soaps as well. Then it would be a surprise! Whoo hoo!

However you make the soap, it's nice to tie it up with a nice ribbon for presentation.

i made "looks like you ornaments" that were a hit. i made the kind of playdough you cook in the oven - recipe below - then rolled it out, used a gingerbread man cookie cutter to make little people. i stuffed some dough thru a garlic press to make their hair and poked a hole at the top of their head for the string. when they came out, i used a thin sharpie to draw their faces and then painted clothes on or cut out material and glued it on. you don't have to be a good artist to do this. my mom has black curly hair, glasses and always wears black clothes. hers didn't look exactly like her, but everybody knew it was her.
fun to make, cheap and kind of different.

BAKER'S CLAY
Shape and bake Christmas ornaments, jar lids, etc.

Mix together:

4 cups flour
1 cup salt
1 1/4 - 1 1/2 cup water
Knead until smooth. Add food coloring if desired. Make shapes and bake at 300 degrees until set and golden (1/2 hr to 1 hr). Seal with shellac, or for a more golden appearance, paint with a beaten egg.

For the menfolk: embroidered handkerchiefs! I think handkerchiefs are so charming, and I think one with a guy's intials embroidered in the corner would be such an awesome gift.

Kristen over at Schmancy Toys just did a fun series of blog posts featuring diy projects.

If someone were to force me to make something with glass paint, I'd probably get some glass plates from Goodwill and paint the back of 'em... then decoupage over the paint.

Also, have you tried the needle felting? It's fun for the people.

To add to Rosalie, you could do that but add their pictures in a "dirty magazine". My friend did that for another friend's bachelorette party and it was hilarious!

Other ideas:
with your glass paint, personalize cups and dishware from the thrift store.

magnets

embroider vintage pillow cases

embroider stockings

Make a hookah out of an old wine bottle--one of my friends has done this. Search for "wine bottle hookah". You could use the glass paint to make cool designs on the bottle.

Do you knit? Fingerless gloves can be a fantastic (and very quick!) little project to make, en masse, and use very little yarn (usually only 200 yards, max).

Also, a basic ribbed hat can be a great little gift for men or women, and also much faster (and less yarn-consuming) than, say, a scarf.

We'll be selling kits for both at the Urban Craft Uprising this weekend!

Homemade marshmallows. I don't know how easy or cheap they are but I know people who would always enjoy getting them.

Embroidered hoodies: get a hoodie from a thrift store (or steal the gift recipient's hoodie they already have) and embroider something rad on it...like a raccoon. Or a crow.

Secret hiding books: get an old cool looking book from Goodwill and hollow it out. People love secret hiding books!

I've done cards several times, it was very cheap and very easy. I buy some nice looking card stock from Kinkos, and a set of cheap watercolors, and a glitter glue pen or two. Then, I go to the bar and drink a hot toddy or egg nog while putting a few swishes of a couple different colors on the card, line a couple of those with glitter glue, and voila!

The biggest expense was the drinks, but I've met lots of nice people while doing these, and the people sometimes help. :)

Stenciled t-shirts are relatively easy, especially because pre-designed stencils are all over the internet. Just make your stencil on some contact paper, attach to your shirt, and use fabric paint on a sponge brush to daub your design on. Make sure to put a piece of cardboard inside the tshirt so it doesn't bleed through to the other side!

Every year I sponsor a craft project for my office mates during the slow Christmas week. Last year we did Solstice magic wands - everyone found a good branch and after we cleaned them off, we adorned them with feathers, glitter, ribbons, paints and anything else we could think of.

Just took the artsy crafty bits, free branches from the trees, a glue gun and imagination and we were all pretty happy with the results.

What about paper mache? I love the idea of making paper mache portrait figures of my friends. Now if I'd just make the time to do it. Here's a link to some cute paper mache squirrels made by kids for inspiration: http://manualescanigo.blogspot.com/2010/10/ardillas-ardillas-ardillas.html

Granola. Everybody likes some good home-made not-too-sweet granola. Unless they are down with people.

http://www.thesunbreak.com/2009/12/08/give-the-edible-gift-of-maple-granola

Tiedye Bleaching clothes!

What have you made in the past? I need ideas!
Idea for you - amigurumi (Japanese crochet) ornaments - just make sure the pattern is actually for something small, most are larger than you'd think.