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This includes the fabric that you will be using for your appliqué as well as the item you will be attaching the appliqué to. The only instances where you should not wash the fabric is if you are using a non-washable material, such as felt or silk. Wash the fabric first, then dry it. Iron it last to remove all wrinkles. You can draw the design by hand, or use a stencil. You can even print the design off of the computer. Simple designs work the best for appliqués, especially if this is your first time making one.  Try to use a thick paper, such as cardstock. It will make tracing easier. If you are doing letters, words, or numbers, reverse your design; it will come out the right direction in the end. There are lots of different types of iron-on, fusible interfacing. You must get the kind that has adhesive on both sides. When you buy it, one side will already have the adhesive visible; the other side will have paper on it.
Pre-wash and iron all of your fabric. Choose and create your design on a sheet of paper. Buy iron-on adhesive meant for appliqués.