For the first step, you're simply going to prewash and dry your fabric. This is important, because you'll want to be able to throw these cloth napkins in the wash, and you don't want them to shrink! If the fabric wrinkles, you may want to press the wrinkles out before cutting your squares.
Cut fabric squares 18" x 18" (or any size you wish).
With wrong side of the fabric facing up, fold one edge over 3/4" and press.
Then fold the same edge to meet the fold you made, and press. This makes about a 3/8" wide hem.
Repeat steps three and four (folding edges over and pressing) on opposite side of the napkin.
Then make a hem on the other two sides. Fold over the first side 3/4" and press, working right on top of the other hem you made in steps three and four. You will do this part a bit differently though, to get the mitered corner look.
After making the first fold at 3/4" and pressing, open the folded hem back up and fold the corner over diagonally and press.
Then fold under the hem and press as you did in step three. Put a pin at the corners to hold the hem down.
Repeat on the opposite side of the napkin.
Sew along the edges of the napkin to hem, making sure to backstitch as you begin. Pivot at the corners. When you reach the end, be sure to backstitch again.
After stitching down the hems, I like to take my napkins back over to the iron and press them one final time so they're nice and crisp. That's it! Enjoy your new homemade cloth napkins!