this technique creates almost an 'inlaid' paper look on projects that i love...and here's how you do it...
use a pencil to lightly sketch your pattern, pierce holes at even intervals and then erase pencil lines. choose the paper or cardstock that you wish to applique with (mine is the aqua pp below) and place your pierced piece (photo above) on top of your applique piece (aqua) and re-pierce through the same holes.
now you should have two identically pierced pieces of paper/cardstock.
using scissors, cut your shape out of the applique piece by using the pierced holes as a guideline...you want to cut along the outer edge of the pierced holes, this will give your stitching the appearance of being appliqued. glue the applique piece into place making sure that all the holes are aligned.
stitch the applique...i used a 6 strand on the aqua piece and a 3 strand on the text paper just to demonstrate the look of a thinner stitch v. thicker. my favorite for applique is a 4 strand :]
here's another example of paper applique technique: (i used a 4 strand on this example)
check back in a little while for another technique and the giveaway is tonight friends!