First, determine what size you want to make it. For something like a DVD, I figure that the material needs to be an inch larger on the sides and then quite a bit extra at the top. (For something thicker, you'd need more width and length.) The fabric is shown here doubled over with the fold at the bottom. I cut through both layers along the selvage at the right and then at the crease there at the top.
Unfold the fabric and you're going to have a looong rectangle. I like the top of my gift bag to come to a point, so I trim the corners at ONE end of the gift bag. Layer this fabric right sides together with the material that is going to be on the inside of the bag (note that you will actually see this material so use something matchy or at the very least that you don't hate) and cut it to the same size. Then layer these on top of the batting and cut to size again. [Note: you can actually cut all three of these layers at the same time, but I make fewer mistakes doing it singly.]
Pin the three layers together. Personally, I like sewing with the batting on top. You will be leaving a gap that is large enough for you to fit your hand through. Make sure to backstitch at the beginning and end of your seam. I use a seam allowance a bit bigger than 1/4" but you can do bigger. This is called the pillowcase method.
After you've finished stitching, stick your hand through the gap between the two fabrics and pull the insides of this sandwich to the outside. You might have to fuss with it a bit to get all the corners poked out, but they can be curvy rather than crisp. Fold the loose material down and sew the hole closed with a whipstitch.
Do whatever quilting, tacking, tieing, or buttoning you would like to hold the three layers together. If you're using polyester batting you may not need to do any of that at all.
Sew the sides of the bag up, leaving enough of your cornered flap at the top so that it can comfortably fold down. You can use embroidery floss or perle cotton and take big bites of the outer material so that the stitches really show up or you can do it almost invisibly using quilting thread and a blind hem or a whipstitch.
I like to sew a decorative button on just for interest, but tassels are fun too. The last step is to glue velcro on the flap and the bag so that it will stay closed. Use fabric glue - plain old white schoolroom glue just won't hold, tho I imagine hot glue gun glue would. Try saying that fast.
I'm really sleepy at the moment, so I hope this makes some sense at all. If not, just ask.