The picture is one that i took using my setup.
Step 1: Backdrop.
I wanted a more permanent, but yet still portable solution. It also needed to be cheap. I bought a load of PVC pipe and fittings for about £20. I then got into my lego mindset and assembled it into a frame like shape. I'm sure you can use your imaginations to create a stable design.
I then got a big piece of white fabric, this cost me about £3.
I sewed a pipe sized loop at the top off the piece of fabric, to loop it over the top of the frame.
Step 2: Flash.
Diffusers soften light, this makes for softer shadows, more aesthetically pleasing photo's. There are plenty of instructable's on making diffusers. I plan on making some one day... But for now, i use a tissue and some elastic bands.
But what i prefer to use, and find it works better, Is to aim the flash's at the ceiling (provided it is white) and use that as a big diffuser. The results are quite remarkable.
I have my flash's on tripods, but you can use anything really. Rest it on the floor or clamp it to your ears, I don't care.
To illuminate the whole object you are photographing, you want a flash on either side. You could use lamps, i guess. But you have to be careful, as they give off a more yellowish colour, which sucks.