I've never really done a how-to in reference to something technological, so bear with me. (Thanks to my hubby Vic for introducing me to the snipping tool)
1. Initially you may want to select some "papers" and such online. You could do a search for free digital scrapbook downloads. Some good sites for freebies are Two Peas in a Bucket, Designer Digitals, and Shabby Princess. Obviously, you could also purchase papers to use; many are very inexpensive and the beauty with digital is that you can reuse them over and over again.
2. After downloading these files of scrapbook materials, you will then need to import them into Picasa as you do for all other images.
3. Next you can begin the process of creating your collage. Having an idea of what you'd like your layout to look like prior to beginning is helpful, but not necessary. You can always back track if the need arises.
4. You will begin by selecting the pictures and papers you'd like to use in your collage. Hold the ctrl key down as you select and you can put them into the collage all at the same time. The pictures do need to be in the same file to use the ctrl key. However, do not worry, there is another way to get pictures from multiple files onto the same collage.
5. You are then brought to your collage page. You will need to select the size for your collage. Although 12 x 12, 8 x 8, etc are not options, you can create a custom aspect ratio by scrolling all the way to the bottom after selecting Page Format.
6. Next you enlarge your selected image or paper to use as your background.
You can also do this by selecting settings, going to background options and click on use image.
7. To select more images that are not currently shown in your clips folder, click get more and this will bring you back to all your Picasa files. Select the images you want to use and then click Back to collage at the bottom right of your screen.
8. Drag your images into your collage, arrange and resize.
9. Click Create Collage
11. Next, save as a separate image so you can then use it as part of another collage.
12. You can then repeat the collage process again by selecting your images. Your previous collage is now an image that can be used when creating another collage. (I think I'm confusing myself by this point) In the snip below I selected my images for the collage and then chose one of the images as my background. Next you will have to delete the smaller image still visible on the top.
13. Create collage (again)
14. Next you can add text as you please. You are able to change the size, font, style, alignment and transparency of your text as well as rotate it however it best suits your page.