I have been wanting to do this for ages and finally got out my vinyl! Wordart is courtesy of Sarah :)
Make sure you have the right setting for cutting your Vinyl, my Eclips has a vinyl setting but you need to make sure your machine 'kiss cuts' it so that it doesn't cut right the way through the backing paper. You will also need transfer tape which you can buy by the sheet or in rolls.
It takes a while to cut out and you then have to 'weed' out the excess vinyl very carefully and then transfer onto the machine. Take your time and the finished result will be amazing :)