Felting is not difficult at all, you just need patience!
Your item has to be knit out of a natural fiber - usually wool is used for felting. You just toss the knitted item in a washing machine with several pairs of jeans or old towels (none of them that you care about) and run it through the agitation cycle in HOT water. You can put the item in a zippered pillow protector or lingre bag to keep the "fuzzies" from getting in your washer. You can use wool wash, woollite, dish soap, laundry detergent in small amounts if you want to....but it isn't necessary.
You run it through the agitation cycle and pull it out every once in a while to check the size. Keep running it through the agitation cycle until it felts down to the size you were hoping for or until the stitches are no longer visible.
If your hot water doesn't get too hot you can boil several pots of water and dump them in the washer (I've done this several times).
You can rinse the finished product in cool water, or not. You can toss it in the dryer for a bit to help it dry, or not. Once it is the right size you'll probably want to block it on boxes or stuff it full of plastic grocery bags to get it to maintain the size/shape you want.
Felting isn't expensive, persae, but hot water can get pricey!
I hope this helps - here are some really great articles on felting for beginners. If you have any other questions feel free to ask!
Article from Knitty.com
Another Article from Knitty.com