I made my first insect hotel today. I have been a fan of the idea for years, but this was the first time I put one together. As you can see, it is kind of random and sloppy like me. I used a five gallon plastic pot I found behind the shed in my yard. Bamboo makes a great substrate - the hollow stems are great niches for insects and spiders to take shelter. Straw works well too. Fortunately for me, the people who owned my house before me thought that bamboo would be great planted everywhere. I cut some back and then chopped it up into pieces roughly the size of the pot.
Insect hotels are a perfect place for native bees, and predatory insects (i.e. lady bird beetles or a praying mantis) to find shelter. It is a spot to lay eggs in your yard. A home in the yard where they can live. You want them around so that they can pollinate your garden, or protect it from aphids, mealy bugs or other plant-eating insects.
Some of the photos I've seen are quite elaborate. Today I decided to go for finished before perfection. But these links will give you an idea of how creative you can get making your own.