Many gardeners like to start seeds in seed trays, especially if the soil outside is still too cold for direct planting. The trouble with using just trays is that young plants can be traumatized when their patch of planting soil is removed from the trays and placed in the soil outside. Peat pots remove that risk of trauma; you can simply plant the entire pot into the outside soil, because the pots themselves will dissolve shortly after they are planted.
Cut the toilet paper or paper towel rolls down to the height you want your peat pots to be--usually 2 to 3 inches--meaning that you will get two tubes from the toilet paper roll and four or five from the paper towel roll.
Cut pieces from your newspaper or newsprint long enough to wrap two or three times around the tube and 1 1/2 inches longer than the tube.
Fold and tuck the extra length of newspaper up into the tube, wadding it in. This will be the bottom of your pot.
Pull the toilet paper or paper towel tube out of the top of the paper pot. The pot should stay rolled up.
Fill the pot with your peat material.
Repeat until you have all the pots you need.
Plant your seeds in the peat pots and place your pots into plastic seed trays or any other shallow container. Water your peat pots by pouring water into the bottom of your container so that your pots can draw water up through the bottom. When you're ready to plant your pots, simply place the entire pot into the soil. After a short time, the paper will break down and the plant will be able to send roots out from the pot and into the soil around it.