Instructables
Picture of Make a laser cut ornament
This is an ornament cut from translucent acrylic 1/8" sheet cut according to a design made in Adobe Illustrator. Once you make the file in Illustrator, you can cut as many as you like. You can vary the color, the size, and even stretch or warp the shape. With a laser cut image, the negative space elements are also usable, So for this design I have hundreds of little parts that are scrap and can be re-purposed for jewelry or other ornaments. The size of this actual object varies from 4 inches in diameter to 11 inches, depending on which version I sent to cut.
 
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Step 1: Trace an image with the pen tool in illustrator

Picture of Trace an image with the pen tool in illustrator
There are many ways to create stencils in Illustrator. Here's one method:
Take a simple photo or sketch, import it into illustrator, and trace it with the pen tool.
My shape involved a bunch of mirrored figures, so I traced one side and then copied and pasted and mirrored it.

Step 2: Copy, Paste, Mirror, Shrink or Enlage, Rotate and Duplicate

Picture of Copy, Paste, Mirror, Shrink or Enlage, Rotate and Duplicate
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Using your line, you can copy and paste it.
Mirror the line and link together the lines with the pen tool.
Add variety to your design by rotating, shrinking or enlarging the shape.

Step 3: Or use Live Trace

Picture of or use Live Trace
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If you don't like the pen tool, try Illustrator's Live Trace feature.
You need an image, which you can drag, or copy and paste into Illustrator.
In Illustrator, go to menu Object>Live Trace>Tracing Options.
When the dialog box pops up, check "on" the preview feature.
Slide the threshhold number up and down until you get an image you like.
Keep it simple! The more lines and intricate shapes the laser cutter has to cut, the longer it takes and the more it may cost, if you are paying a laser cutting shop.

Step 4: Finished Design

Picture of Finished Design
Your finished design needs to be only lines, with closed shapes as described before. No filled in colors. All lines need to be uniform size, plain, and not made using a "brush stroke" feature.
Shapes should not overlap. If you have experience working with stencils, it's the same type of thing where overlapping shapes will fall apart if cut.
You can certainly make some unique ornaments :)
Love it! Your source image is so creative. :D