For a long time the most common faux finishes were accomplished with natural sea sponges, applying one or more accent colors over the base coat.
If you're using a latex paint that can be thinned with water, experts recommended thinning it with one part water for eight parts paint for best results.
TIP: Don't use synthetic sponges because they produce straight, regular patterns that are noticeable on the wall. Natural sponges are much more irregular and produce tracks on the wall that are less obviously sponge applications, and buy enough sponges so you can use one color per sponge.
Sponging the First Layer
Use the flat bottom of the sponge to apply the paint, first soaking the bottom with paint, "offloading" the excess onto cardboard or newspaper and then applying it to the wall.
Daub the paint on lightly, making "sponge-prints" on the base coat and overlapping only as much as needed for continuity. Don't sponge over any prints yet, or it'll fill in too much paint. And twist the sponge to the right and to the left between prints so they look more random and exhibit no obviously repeating pattern.
Reload the sponge with paint as often as you need, but try to move quickly across the wall so you don't overwork any areas.
TIP: It's hard to work a full sponge into the corners, so a cut a sponge into narrows strips before you start and have those standing by to do the edges and the angles.
Sponging Subsequent Layers
When the first sponge layer is done, start the second layer, sponging on the new color in the same random fashion over the prints of the first layer but allowing the colors to show through the holes and openings in the second layer.
Occasionally step back from the wall to make sure there's no pattern developing and no obvious areas of lighter or darker paint. Finish covering the wall and repeat the process for the third layer, if there is one.
On the final layer, let your own preferences guide you on how much or how little to apply. The idea, though, is to end up with a random mixture of colors and shades that don't look like they were sponged on.
NOTE: If you don't like what you end up with, remember you can just paint over it if you want.
One variation on the stenciling technique (described above) is to cut a pattern into a sponge and use that to stamp the pattern onto a surface. A regular, synthetic cleaning sponge works best for this application because of its relatively flat surfaces. For the patterns, you could use anything, but your best bet is to find cookie cutters in shapes you like.
The hard part of the job is cutting a precise pattern into the sponge. With a cookie cutter it's a lot easier. Just press the cutter into the sponge and trim along the outside edges with a utility knife. Make sure to use a sharp blade, handling it carefully because the blade can easily slip.
Once you've cut the sponge, you're ready to paint. Before sponging the wall, practice on a scrap of cardboard or drywall to get just the right feel for the stencil and how much paint to use.
To make sure you get the look you want, mark off the likeliest spots for stenciling before painting then make any placement corrections.
When you're ready to paint, pour a little paint into a shallow, flat container like a pie tin or a paint lid, and use that to load up the sponge. Dunking directly into the paint bucket may overload the sponge. Press the sponge onto the wall at your marks, periodically stepping back to check your work.