There are a lot of options. Avery sells sticker sheets that are shaped like wine labels (square sides/bottom, curved top); simply print using your home printer and stick onto the bottles. Or you can print on normal paper (or patterned paper), cut them out manually, and stick them on (glue stick, thick paste of milk powder + water, etc, work). If you lack a good colour printer, any decent print shop will do the job - plus many shops carry fancy paper, giving you that option without having to spend a lot on a whole pack of paper.
In terms of design, the sky's the limit. Using word (or free options like open office) you can load up the label templates and make simple text-only or text + inserted image labels. There are some label-generating webpages, which'll make you simple labels for free, or fancy ones for a nominal fee. If you're comfortable with computer-based drawing programs free (i.e. GIMP and Inkscape) or paid (i.e. photoshop, illustrator) raster and vector based drawing programs can be used to create amazing labels. There are even graphic designers (some of whom I think are on this board) who'll design you amazing labels for a fee.
I'm not sure this info helps, as its really a matter of personal preference. Personally, I like the DIY method, but I'm slow at the drawing portion and a bit of a perfectionist, so it takes a lot of time. YMMV.
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