I did mine in Microsoft Word. I'll assume that you have that since most people do.
Let me give you some quick step-by-steps. Practice a couple and it comes real easy then.
1. Go to Word
2. At the top menu, click View>Toolbars>WordArt
3. On the WordArt tool bar, click the left hand icon (Insert WordArt)
4. Choose one of the styles and click "OK"
5. Type in text and click "OK"
6. Right click on your text and click on "Format WordArt"
7. Click Color>Fill Effect>Picture
8. Select a picture file from your drive and click "OK"
9. You should see the picture in the letters of your WordArt.
Good luck . . . and have fun with this. I know that I am!
Here is one that I made for one of my friend's sons who worked in the College Program at Disney last year. He was a CM at the Nemo ride at EPCOT. It worked out perfectly since his picture formatted to the "L" in Kyle.