The key to the process is to find a good photograph - the better the photo, the less you have to do. I have found Morguefile http://www.morguefile.com/ to be the best source of free images that allow comercial use. All their images are free to use as book covers, so you don't have the experience of finding the perfect photo only to find it says strictly no commercial use and their photos will open with Adobe Photoshop, which I coiuldn't make images from StcXchng do (http://www.sxc.hu/.) although I'm sure that's just me.
I tried all kinds of free programmes - but they were either too simple and wouldn't do what I wanted, or they were too difficult. Fine for an expert, but no good for someone with no skill who just wants to get the job done. So, do you know anybody who can use Adobe Photoshop? Ask them to spend an hour or so showing you the basics (I am slow with things like this, and it took me 2 hours. Thanks to my colleague Matt Briggs for putting up with me!) After than, you will be familiar enough to be able to find what you need in Photoshop for Dummies or a similar reference guide.
You then open a new document in Photoshop, set it to the required size (Kindle suggest 800x1280 pixels) and then download your chosen photo. You click on 'open with photoshop' and it will open in a new document. You can then cut and paste the part of the photo you want into your already waiting document.
Then you add a couple of textboxes and type in the title and your name. There is a good range of fonts to choose from and Matt suggested using the 'eyedropper' tool. This will pick up a colour from the photo and you can use it for the text, which makes the colour scheme look pulled together.
Light backgrounds don't work on the tiny thumbprints that e-books show, so you can colour the background of the document and just shrink the photo slightly so that the background acts as a border.
It may sound simple - but it's taken me about 3 weeks to learn this. Let me know if you know any good tricks that make covers look better.