Last year one of the mom's in Zack's class did this craft with her kids, and then passed out the results as holiday gifts. So cute!
You need: marshmallows, stick pretzels, sticks (popsicle or lollypop sticks - you can get those at Michael's Arts & Crafts), markers using edible ink (you can buy those at the grocery store in the baking section), and Fruit by the Foot.
Put two marshmallows on the stick. Poke the pretzels into the bottom marshmallow as arms. Tie a "scarf" of Fruit by the Foot between the two marshmallows. Draw on buttons and a face. Use a tiny bit of rolled up Fruit by the Foot for the nose.