Diffuser panels are very useful tools when it comes to photography because they allow you to control the light surrounding and falling on your subject, and to eliminate harsh shadows that can cause subjects to look bad. Diffusers are generally part of a reflector kit that you can purchase, but even the small ones cost a pretty penny. Thankfully, creating your own is much cheaper and is a very easy process.
A diffuser is just a white panel that is going to allow some light to pass through it, but at a very toned-down level. Sometimes referred to as a scrim, it is going to create a natural soft box for you. So, all you need to create your own diffuser is white fabric, something to mount the fabric on, and a way to mount it. It's up to you how large of a diffuser you want to build, which will determine the amount of material that you need.
Wood is probably the easiest to use for mounting, along with some finishing nails or staples. You can also get creative and use things like PVC pipe or wire. Instead of fabric, you could use a white shower curtain or vinyl. As long as it's white and can let light through, it works.
If you want to get really creative and create colored light, you can use any lightly colored fabric or other material. So long as the light can still get through the chosen material, it will work. Most photographers use gels to modify the color of light, but a colored diffuser panel will do the same thing.
You can build your diffuser panel to any size, and with any number of framing styles and materials. The easiest way, however, is with a staple gun, some 1 inch by 4 inch wood pieces, and a section of a cheap white bed sheet.
Your first step is to build a frame. You don't want it to be an uneven surface because, when you add the fabric, it has to stretch smooth across. Any bumps or ripples can cause uneven lighting, which is what you're trying to avoid by using the diffuser. Lay out your wood or other framing material on a flat surface and put it together. In this case, with the materials selected, stapling edge to edge would be the best option.
Once you have a frame all set and ready to go, stretch your fabric, or other white material, across it. It's recommended that you do one side at a time to avoid wrinkles. There is no right or wrong way to go about it though, so use the method that works best for you. In the wood frame example, staple the fabric down as you go along each side. Try to use three or four staples per side to prevent the fabric from coming loose and bunching. After the sheet is tacked down, you're done.
For a more finished look, you can put another wood frame over the top. You don't have to make the frames square, either. Experiment with different shapes and sizes--hexagons, triangles, circles. If you can build it, it will work.
If you have different materials available, you could just as easily glue your white material down to wood, or sew a pocket in it to slip it over PVC pipes. The sky's the limit when it comes to building your diffuser. The most important part is that you're comfortable with how it is constructed, and that you will be able to use it when it's complete.