Below are some examples of some pictures I've printed out using both the freezer paper method & commercially prepared inkjet printable fabric. I think the freezer paper method gives a softer look. The commercial printable fabric seems to give a sharper image. The type of fabric also makes a difference. Higher thread count in the picture on the right. It just depends on what effect you want.
I often iron freezer paper onto muslin or some other fabric and then cut it to 8.5 x 11 inches. It works pretty well and it's definitely cheaper. **Added: Debra points out that fabric should be treated with Bubble Jet to keep it from fading or the image disintegrating if it gets wet. **
Freezer paper images.
The last two were printed on commercially prepared fabric.
There are a multitude of tutorials on doing this on Youtube and other places on the Internet. Try Craft Gossip, too. I'd search for them and link them here but my computer is an antique and it takes FOREVER to load photos - and some of these blogs (heh, heh) are very photo-intense. Kind of like this one. I'm sure there are folks out there who have done this and have great ideas and tips to share, please feel free to do so in the comments. And I'll work on getting the links together during lunch at work where I have a much faster computer.
Please do comment on the photos above, and come back soon.