Here's what you need:
1. Plain envelope. I used the standard small mailing envelope. Not sure what size that is called.
2. Background stamp. Wheels are awesome for these.
Step 1: Seal envelope... Yes, seal envelope!
Step 2: Stamp your background image on both sides of the envelope.
Step 3: Cut off the top of the envelope. (If you use a #10 envelope, cut it in half and make 2 bagalopes!)
Step 4: Score 1/2" on the 3 uncut sides. (To change the dimensions of your bagalope, score at 3/4")
Step 5: Fold your scored edges and run a bone folder over them to make sure they have a good sharp fold.
Step 6: Insert your hand into the bag to pop it open.
Step 7: Push the bottom up. You will end up with two triangular shaped tabs on the bottom. Fold under like you would on a present. Adhere to the bottom.
Step 8: Punch two round tabs out using the Round Tab punch from Stampin' Up!
Step 9: Fold the round tabs over and adhere one to each side at the top of the bag.
Step 10: Punch holes in the top of the round tabs.
Step 11: Tie ribbon through the two holes in the round tabs to close bag. (of course, wait until you put your item in there!)