A couple tutorials I really liked: http://vintagechica.typepad.com/the_life_and_times_of_thi/2006/10/rag_rug_tutoria.html
And a tip I found on a Crochet Works forum on Indusladies.com.
"Prepare your cloth by unpicking both hems. It is best to use 100 percent cotton sheets for this, polyester fabrics will not tear so easily. Now starting at one end, tear off a 1 inch wide strip from the cloth. When you come to the end of the strip stop about 1 inch from the end, so that the strip is not completely separated from the main cloth. now start tearing the next strip 2 inches away from the edge, so that your next strip is 1 inch wide but still attached to your first strip. if you tear like this in a zigzag manner, you will end up with the whole bedsheet torn into one continuous long strip, which you can wind up into a ball as you go along, so that it doesn't tangle. The tearing process is a great stress buster and can be done to relieve any bad feelings you have towards your boss, neighbour, household assistant, etc."
Do you want to go and start tearing up your bed sheets? I sure do!