Stencils are basically the most important aspect of screen printing. Without a good stencil you will not get a good printed image. There are a few different ways to make stencils, and they all have pro's and con's.
It is most important to understand that you must first use a photo POSITIVE stencil (the positive should be dark anywhere you want the ink to be printed and transparent everywhere else) In order to make your stencil work correctly, you need to make your stencil as OPAQUE ( meaning that no light can pass through the image) as possible. There is no wiggling around these rules. If you try and force any stencil to work that isn't properly prepared, you are basically going to make your experience a nightmare.
Decide on what kind of stencil is right for your project
1. Hand drawn stencil
While these seem like the easiest to create, it is very difficult to make a stencil by hand that is opaque. You will need some sort of translucent film like vellum or acetate and a very opaque drawing medium. (Do not use mylar as it reacts to heat and moisture and can create major issues in printing.)
SHARPIE'S ARE NOT OPAQUE AND DO NOT USE THEM
Good things to use to create your stencils are black acrylic paint, black paint pens, and black micron pens for fine detail. I emphasize buying BLACK because while other colors may work, the majority of the time they usually tend to let light pass... it is not worth the pain it might cause so just buy BLACK.
I prefer to work using hand drawn stencils because I want my work to read clearly as being hand made. For some projects, especially those using text, people prefer a very precise line, in which I recommend making a digital stencil:
2. Digital stencils
Computers are neat. Between Illustrator and Indesign, you can create complicated images for screen printing easily, and get a very accurate stencil printed.
If you are going to go this route, I would advise finding a local digital printer that can print film for you (if in SF check LOGOS Graphics ) as they can guarantee that your printed image will be opaque.
If you are printing on acetate at home, most ink jet printers do not print black opaquely, unless you have the appropriate film. If you think this is the route you'll end up printing, I suggest getting film from VICTORY Factory that can turn any inkjet ink opaque.
Printing out digital stencils professional can get quite expensive, so determine first if it is financially worth it!
check out THIS awesome article for an in-depth 'how to' on digital file preparation in Adobe.
3. Hand cut stencils
Hand cut stencils are great if you want to print large flats of color or images that are not too complicated. For instance, if you want a background color behind your entire printed image, all you would need to do is find or cut a sheet of construction paper to size and shape, then expose it to the screen. Quick and easy! If you want to make a more complicated image, it is still possible and especially easy if you use Rubylith, which is translucent and opaque (hard to image... but it works)
Once you determine the type of stencil that is best for your project, determine how many colors you are going to be printing. If you are new to screen printing, I recommend that you make each color a separate stencil layer. Make sure to 'trap' your stencil layers about a 1/4 inch all around. (Trapping in this sense means overlapping the edges of each stencil so that no white space will print, this will help with registration)
(this image is from that Smashing Magazine article I posted above)
I would make sure to regularly align the stencils to make sure that everything matches.
Double check all stencils on a light table if possible. Even if it SEEMS opaque, it might not be... and its better to be safe then sorry, right?