My mom made this adorable nativity scene for my kids 4 years ago. They love it. Kaylee loves it because she likes knocking blocks over. She can't walk by a stack of blocks without practically sacrificing herself to scatter them.
I taught a class on how to make these a few years ago in Kodiak. I couldn't find the stickers in the size that my mom used so I bought them a little smaller. Derrick cut out a couple hundred 2.5" blocks and smoothed the edges on each one. What a guy. At the class the ladies applied a sticker to each block of wood, added a coat of varnish, then a clear coat of spray.
The ones my mom made were first painted in a cream colored acrylic paint, the edges were lightly sanded, then stickers were applied. Finally, a light coat of varnish went over all of it. I liked the way hers turned out better than the other ones, so if I ever make more, I'd paint them first. But either way they are cute!
The stickers are made by "Me And My Big Ideas" (MAMBI). I found all of the ones I needed on a scrapbooking site online since I was living in Kodiak, but Joann's sells them too.