Step 2: Prepare the Ping Pong Balls
Drill a hole in each ping pong ball.
There are several ways to do this such as a drill, exacto knife, or by poking a hole in it with a nail. A nail is the quickest method, but you will need to spend more time later gluing the balls to the lights. With a clean hole just smaller than the bulb the ping pong ball will stay in place without needing glue.
To drill the hole in the ball you will need a drill bit that is slightly smaller than the Christmas light bulb. Approximately 3/16" should be good, but make sure to test fit a few before drilling the rest of the balls. You will need to prepare as many ping pong balls as you have lights, if it's a long string it probably has 100.
A quick note on drilling holes in ping pong balls:
The best method I found for putting holes in the ping pong balls uses a c-clamp, some paper towels, and a drill. First fold a 1.5" wide strip of paper towel over on itself several times so that it fits on the plates of the c-clamp and tape one on each side of the clamp. Next adjust the clamp so that it holds the ball just enough that it doesn't slip when you drill into it. Because of the give in the paper towel you can pull the ball out and press another one in without needing to readjust the clamp. If anyone finds a better method please share in the comments.
I found I got the cleanest hole by first pressing the bit against the ball so it depressed slightly, then running the drill at medium to high speed while applying light pressure. A drill press would be very helpful at this step, but is not necessary. As always, please exercise care when using power tools.