How I Did It
This is how I did yesterday's bokeh shots of Christmas lights.
Camera (Dslr works best, but I think you can do this with a P&S, with a little perserverance)
Lens - I used a Canon ef 50mm f/1.8 - aka the Nifty Fifty. This is basically a cheapo plastic lens, but it gets good reviews everywhere and with good reason. I picked mine up used on ebay for about $70.00
Black construction paper, paper punch, or small sharp scissors, depending on how dexterous you are.
First, cut a strip of construction paper to fit around your lens. Tape together. Next, cut a circle with tabs to fit over this. You want to block as much light as possible from your lens.
Then, depending on how good you are with circles and cutting, you can proceed two ways: either cut a circle with about a 1 inch diameter out of the middle of this circle, or freehand cut your desired shape. If you have cut the 1 inch circle out, do this next: Cut a slightly larger than 1 inch circle out of construction paper, punch your desired shape, and tape over hole you cut. Tape the tabs over the taped strip that fits over your lens, and voila! You have a mask.
Set your lens to manual focus. Make sure you have the lowest aperture you can get with your lens = mine is 1.8, duh. Point camera at lights, make certain they are out of focus, put mask over lens, and shoot. You should have something similar to what I posted yesterday. Depending on your camera, you may have to play with this a bit. If you are using a point and shoot, you may have to play with it quite a bit! Also, make sure your cut shape is very small if you are using a point and shoot. I was able to do this with my Canon S5IS, so YMMV.
Also, you can see my lens masks are a bit battered. Don't let your cat sit on them!