My daughter just had Girl Scout camp and was in the "Red Crab" unit.  She wanted a red shirt to wear that had a crab on it, and after an extensive search, I couldn't find anything locally, so I decided we would just make our own. 

There are so many cute appliqued t shirts online, and I knew I could easily make my own, and for next to no money.  Plus it would be custom, since I let my daughter choose the fabric.

First I found an image of a crab on the internet, which I traced onto Heat N' Bond iron on adhesive.

I have worked with iron on adhesives in the past (Steam A Seam to the personalized shirts for Disneyland and Heat N' Bond on my Home is Where the Heart Is wallhanging.) They all work basically the same way.  

You draw the shape you want on the paper backing.  Cut it out roughly and use an iron to fuse the glue to the fabric. (Make sure you fuse the glue to the WRONG SIDE of the fabric and you only iron the paper backing!):

Once it is fused to the fabric, you cut closely along the line.  You can get super fine detail using this method.

The cut out fabric now has a thin layer of glue right up to the edges.

Now you need a t-shirt to fuse it to. I chose a red $6 one from Target:

When you are ready to attach your fusible applique down to your shirt, you peel off the paper backing:

Get it right where you want it, and iron it down:

At this point, the shape is permantly stuck to the shirt, but to keep the edges from peeling up with washing, you want to sew it down.  Most sewing machines will have an applique or blanket stitch (since my sewing machine is specially designed for quilting, my stitch is labeled "Quilt" for quilt appliqueing)

You can either accent the stitches by using a contrasting thread color (I matched the thread to the t-shirt) or you can hide the stitching by using a thread color that matches your applique.

 You need to go around the entire perimeter.

 

The inside of the shirt will look like this when you are through (I used white thread in my bobbin because it was already in there.  To hide the stitches once again you could match your thread color to you t-shirt):

If you aren't comfortable working with this stitch, here is a good video tutorial: