This is a really cool DIY project because you can make these hats before a party or turn it into a full-blown activity for kids. All you need are some paper cups, preferably ones with different patterns and colors, and things like cotton balls, string, paint, and colored tape. If you do decide to turn it into an activity, just lay everything out on the table and let the kids go wild.
After they're finished, they have their own customized party hat they can don for the entire party, or at least until they're inevitably lost. If you do decide to make them before the party, you could get your own child involved.