This is a patch I made for a friend a while back. The rather ugly sequence around the side should give you a pretty good idea of my technique. Also, the matches at the top left there are a good way of showing scale, sorry I didn't photograph it with matches in the final artwork. Probably should have. Whoops.
This is called layed work, where the satin stitch is pinned down with couched threads. It was a very popular stitch about a thousand years ago, but was invented much earlier than that. It is the same stitch they used in the Bayeaux Tapestry in 1066.
Once the layed and couched colour fill is put in, it's easy to add detail over the top.
And I used it on a science fiction future movie cosplay patch. Yep, just call me an anachronist.
Bonus points if anyone can identify the origin of this thing.