This is a relatively easy project once you get down to the actual knitting - the hardest part is in the setup.

I have made 4 so far - all birthday gifts of sorts (3 are baby blankets).

Step 1: Planning Part 1

Decide the following

what kind of project (I have done mostly blankets - baby blankets & lapghans; but you definitely could do scarves, etc)
what kind of yarn/size needles (any kind of yarn should work - I have used super chunky to sport .yarn in my blankets it just changes the look/feel of the project; appropriate needles to the project. Check out all the photos to see the difference - 3 of them are the same -MORSE - but have very different looks)
- If you are a tight knitter (like me) go up at least one needle size
what you want it to say

Step 2: Map It Out

Write out your word/phrase in Morse Code - including spaces (pauses).

Since dashes are technically 3 "dots" and I found it easier to write them out as such as it's easier

Now, to decide how many rows per value (dot or space). To get a clean look I knit this pattern in garter stitch (every row is knit) so my minimum is 2. Ex. 1 dot = 2 rows; this means you are always starting the next element on the "right side" of the work.

If you want to add rows (for desired length) - do so in multiples of 2 in order to keep the clean lines.

Decide what colour you will use for "dots" and what you will use for "pause" (space) and prepare to cast on - gather your yarn and needles.

Step 3: Cast On

Use your favorite cast-on (http://www.knittinghelp.com/videos/cast-on for some cast on inspiration) and cast on as many stitches as you think you will need with your "dot" colour - this counts as your first row.

I use either the gauge on the yarn or a gauge swatch to determine my stitches per inch. From there multiply how wide you want the project to be by the stitches per inch to get your required stitches.

Knit every row in pattern until you have reached the end. Whether or not to carry the unused colour up the side is completely up to you. I do during the letters, but not the larger spaces between words;

Step 4: Cast Off and Finishing

On your final row - cast off!

Weave in any ends and admire your work.

Note:
This pattern could be done with crochet as well - I just haven't done it yet. Virtually all the steps would be the same though - just with crochet.