Step 1: What you need
A piece of muslin the same size as your dryer sheet
Needle & thread
Rotary cutter & ruler or scissors
A pointy thing
Permanent pen(s) that don't bleed - I like Pigma pens
Iron & ironing board
Sewing machine or you can hand sew if you want to
Step 2: How to make the label(s)
Measure your dryer sheet and cut into quarters. Then press your muslin and cut it the same size as your dryer sheet pieces.
Pin one piece of muslin to one piece of dryer sheet and sew 1/4" in from the edge all around and then sew over your first few stitches. Clip the corners close to the stitching - this will give you a squarer corner when you turn the label right side out.
Cut a slit in the dryer sheet only and then turn your label through the slit to enclose the raw edges.
Push the corners out with your pointy thing and then press your label flat again.