Debbie at In the bag, a blog that I frequent, asked me about the personalized labels that I use for my bags. I use a tutorial that I found on Craftster. It can be found here.
I follow the tutorial's directions exactly. I have two different size ribbons that I use. A smaller one for smaller items, and the wider one for bags.
The first time I tried this I used a fancy background for the label, but it really didn't look very good and it didn't match all the fabrics that I use. So..I decided on just a plain white background with fancy text.
I use fray check on the cut ribbons and they really don't fray at all.
Also check out her latest post about lining/interfacing bags. I asked her how she does it and this is her amazing reply!