I am in the process of making some really cute baby shower favors for a shower I'm throwing in a couple weeks. I got the idea from http://www.creative-baby-shower-ideas.com/ and highly recommend the site if you ever throw a shower for someone. The specific link with step by step instructions is here: www.creative-baby-shower-ideas/nut-cups.html .
You basically fold the napkin in half, then bring two corners to overlap a bit. Bring the third corner up and safety pin them together...