Becky, Hobby Lobby has the stretchy crochet for .75 cents. I use those for the baby headbands. I also found some trim that was stretchy that I use. Here are a couple of pictures.
1. Hobby Lobby
2. Stretchy Ribbon Trim
I made them the same way as kcbolt does--fabric stores carry the stretch lace. Just add the little bow.
I made a few of them a few years ago. You can get stretchy lace at a fabric store and add a bow or something cute to it. I wish I would have had my embroidry machine then, I would have so many things to add to it. Just make sure the band is not to tight for the baby's head but snug enought to stay on. Just have fun with it.