Here's the pumpkin I carved for the Keene Pumpkin Festival.
I started with a black and white photo of me and Beth, which I loaded into the GIMP.
First I increased the contrast on the image enough to remove some information and simplify the shapes. Then I erased some background and added an ellipse mask. Next I posterized to reduce the shades of gray to 3 (white, grey, and black). From there I used bucket fill to assign the grey fields to either white or black on a case by case basis. I found that this yielded a more recognizable image than just posterizing to 2 colors from the start.
I inverted the image to get a negative (mostly to save ink), and printed the image, which I then stapled to the pumpkin. I transferred the picture by poking through along all the lines with a sharp stylus. Then I removed the skin from the light parts with a sharp pointy knife.