I've never made myself a nice sig/avatar, simply because I don't really find it all that essential, but that being said, I'm guessing the majority of people do one of two things:
1: Grab photos, use a image manipulation program to blend parts of them together, recolor, etc.
2: Grab a background photo or two, use some software similar to inkscape (Vector graphics design stuff) to make a cool logo, and finish it up with some blending/blurring/retouching with GIMP or Photoshop.
I never had the patience or artistic talent to ever make something decent though xD.
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