The first step is getting the "stick" to the fabric. I use a brand called "Heat'n'Bonde" that you can find in most craft stores, fabric stores, etc. I know there are cheaper products out there that do pretty much the same thing, but I have the best luck with this particular brand. Because I add machine and handstitch to my garments, I use the "Lite" or "Sewable" one. They have a heavy-duty one as well but it makes the fabric really hard to sew and if I don't use stitch it might come off in the wash).
I roll out the Heat'n'Bonde (it's like paper with a smooth waxy side and a textured side) and cut a piece that is about the size of the item I am going to appliqué (I usually apply about a yard at a time because I know I'll use it eventually if not for the immediate project). Then I turn my fabric facedown so that I am looking at the back of my fabric and lay the piece of Heat'n'Bonde with the textured side on the fabric. The directions ready to hold the iron in one place for 7-10 seconds until the paper is adhered to the fabric and then smooth out all of over the paper. Now I have a paper back to my fabric.
If I'm doing a lot of the same number I will make a cardboard template to trace make the same shape on the fabric a number of times. Below you can see all of the 2013's I made for a New Years shirt I sold in my shop (I made about 35 of these shirts).
Then I lay all of the shapes, letters, numbers, etc. out and make sure I like the way they look before I iron them down onto the shirt. Just like before, I hold the iron in place for 7-10 seconds and then smooth over the entire garment until the fabric is adhered and smooth (no corners sticking up!)
You can see below the final product before I stitched it into place.
This particular design ended up having hand-stitch accents on it. It turned out super cute!
And that's how it's done. Not entirely difficult, but lots of steps and lots of careful precision. Maybe you'll try it now? :)