*No offense to those who use yo-yo makers but I simply see no point to them. Sewing yo-yos by hand is so simple, I can't imagine it being made any easier!
Step 1: What you'll need
Pen for tracing-air-soluble markers work very well, but a regular pen will work on everything but the lightest fabrics.
Template (An old CD works great or a cardboard circle cut to your choice of diameters depending on the size yo-yo you want to make.)
Fabric-yo-yos are a great way to use up scraps!
Thread-regular cotton or cotton blend thread to match fabrics or mono filament for invisible stitches
Needle-for hand sewing
Step 2: Cutting your fabric circles
Then cut out the circle.
I find that I like to do yo-yos in stages so I trace a whole bunch of circles, then I cut them all out, then I sew them all.
Note that if you are using a CD as a template, ignore the hole in the middle and only trace and cut around the outside edge. :)