Choose a photograph that is unique to you, your music or your genre of music. If you don't have a good photo of your band, spend a day having a fun photoshoot with everyone, and pick a good one from that. Remember, your photo should be unique and representative. A head-shot of the lead singer is a classic, but is also boring and cliché.
Alter your photograph artistically, using anything that comes to mind; markers, paint, pens, pencils, cutouts or magazine letters. Follow your band's style and make the picture into something unique and fun.
If you're using a digital photograph and are technologically inclined, there is a variety of free and for-purchase photo-editing software available. This will allow you to do pretty much anything you can think of with a photograph.
To edit a physical photograph in a digital photo-editing program, use the scanner/printer to scan in the picture, alter it and then print it out again.
Create your final product to be 4.75-inches-square, and attach it to the inside of the CD case with the clear adhesive.
If you want to do back cover art as well, simply repeat steps 1-3 and attach it to the inside of the back cover. You'll have to remove the CD holder, which should be done carefully to avoid damage.
For a side panel showcasing the band's name, create a strip of art about a half-inch wide and 4.75 inches long, and paste it into the left vertical panel of the front cover.