I recently wrote a new Technique Tuesday for Altered_stArt, I really enjoy doing these for the group. This one uses Fun Foam which is easily available, you can even get it at most dollar stores now so you can save yourself a trip to the craft store. That's where I got these great fun foam letters that were already sticky so no glue was needed. You can cut your own shapes from the sheets of fun foam as well.
My original tutorial is posted to the group as a PDF file so I decided to do a photo sideshow for my blog which is posted below. If you click on a picture it will take you to the album where you can see the comments on how I did this technique. Enjoy!