To make the faces, snip a pair of small circles for the eyes. Place a contrasting piece of felt behind the holes, and then use the embroidery floss to stitch them in place. Once you've done that, add other features like noses or teeth. Get as creative as you like -- add flowers, swirls, dots, etc., to your skulls.
Once you've decorate the face, place the backing piece of felt on, and stitch about 3/4 of the way around the edge of the skull. Stuff the inside with a pair of cotton balls, and then stitch closed.
After you've made all your skulls, measure out a length of ribbon. Use a whip stitch to anchor the skulls to the ribbon, about 8 - 10" apart. Hang your garland over your door or place it on your altar.