When you sew the sides, put the ribbon (one piece folded in half) between one sides' pieces, (folded side of ribbon will be sewn in), so the long pieces of ribbon go to the inside. After you've sewn the sides and turned it right side out, the two pieces of ribbon will hang out. When you have the gift inside the bag, tie the ribbons around the top of the bag and tie a knot. They should be long enough to go around the bag, and not too close to the top either so they won't slip off. I'd give you dimensions, but it varies with the size of the bag. I normally do four sizes when I start sewing them, from very small (can hold a 3" x 3" item), to very large to hold things like sweaters. It's all up to you.
The top of the bag can be folded and sewn down, or lace added, or even just cut across with pinking shears. It depends on the fabric. If the fabric tends to fray, it's a good idea to sew it down. Makes the bag last longer.
This is a great way to use up scraps of material too, and not limited to Christmas. Florals are lovely for wedding or shower presents. Kids patterns of course work great for birthday themes. Plain colors, without patterns are the best for stenciling.