There are devices they sell to make the paper pots, for about $20 but I found (I'm cheap) that if I cut newspaper into strips and wrap them around pill bottles or any other size bottle, leaving enough off the end of the bottle to cover the bottom at least halfway, I can then fold in the bottoms. I then slide the paper tube off the form just a little bit, and pinch the edges on the bottom, and they stay together very well.
Watering is easy, I just keep them in a container and water from the bottom up, and find that I can even transplant things that don't like to be transplanted because the roots never get disturbed at all when planing. The roots will grow right through the layers of newspaper.
I make the strips long enough to have at least 4 layers around,