Here is a shortened version of the instructions. For more details follow this link.
1. Pick your pattern
You want to find images that have strong silhouettes. They will work much better when you are ready to cut them out. A great resource for these are Dover books.
2. Find the images you want and bookmark the pages
Depending on the scale of images that you are working with, you could enlarge them for a dramatic effect. Adjust the contrast, if needed, to get even tonality. As Mr. Peacock pointed out — don't worry if your copies look too gray or the dot pattern is too noticeable.
4. Cut out your images
You will need a pair of scissors and an exacto knife. Smaller scissors will come in handy as well.
5. Clean your surface
Clean your ceiling or wall with a mixture of hot water and TSP and let it dry. This is very important as your images won't adhere to the ceiling if the surface isn't completely dry.
Your are ready to start gluing. You might want to take a step back and look at the overall pattern that you are creating. Cover most of the back surface of the image and then rub it smooth when pressed to the surface. Don't rub too hard, as the images could easily tear.
Mr. Peacock used more of a "light wash" for his decoupage. He thinned some Elmer's glue to a watery, but still sticky consistency. When you are ready brush and lightly coat the surface and around the edges of each image. Your decoupage will dry quickly.
8. You are done!
Mr. Peacock's ceiling looks great, but don't limit yourself to just ceilings or walls. This could be easily done on furniture as well. Check out Abby's post for more ideas.
Photos: Mr. Peacock Blog