The athame is used in many Wiccan and Pagan rituals as a tool for directing energy. It is often used in the process of casting a circle, and can be used in place of a wand. Typically, the athame is a double-edged dagger, and can be purchased or hand-made. The athame is not used for actual, physical cutting, but for symbolic cutting only.
Many Pagans today opt to make their own athames. Depending on how skilled you are with metalworking, this can be either a simple project or a complex one. There are a number of websites that offer instructions on how to make an athame, and they tend to vary in skill level.
In his Complete Book of Witchcraft, author Raymond Buckland suggests the following method. He recommends getting a piece of untempered steel - available at many hardware stores - and cutting it to the shape of the desired blade. Another option is to purchase a steel file that is a few inches longer than the blade you want, and cutting it down to the preferred shape with a hacksaw. Heating the steel in a fire or brazier will soften it so that it is workable.
For people who aren't sure about working with untempered steel, another option is to purchase a pre-made blade. These can be found at just about any weapons or knife vendor's website or store. Many people have bypassed this part of the process by finding an existing knife and knocking the handle off the tang, and then replacing it with a new handle. Use whichever method you choose for the blade, based on your skill level and the requirements of your tradition (in some Pagan groups, members are expected to make their athames entirely by hand).
When it comes to the handle, again, this is a matter of personal preference and the mandates of your tradition. In many traditional Wiccan covens, the athame must have a black handle. The easiest way to make a handle is from wood. Buckland recommends tracing the tang of the blade on two matching pieces of wood, and then chiseling out the space. The tang can then be placed between the two pieces, which are glued together to create the handle or hilt. After the glue has dried, sand or carve the wood into the shape you desire for the handle.
To finish the handle, you can paint, carve or stain it. Some people choose to wrap the handle in leather, which gives it a nice rustic look. If you're artistic, paint designs or your name on it. Symbols or runes can be added with paint or a woodburning tool.
Once you've finished your athame, it's a good idea to consecrate it like you would any magical tool before use. Consecrate Your Magical Tools.