I start by blanking some part, or all of a real Magic card with acetone. When blanking part of the card, I mask off a portion of the card with electrical tape. Then I use a color laser printer to print a custom image on the card. Sometimes due to small alignment issues, or rubbing as the card travels through the printer requires a little touching up after printing, most commonly with a marker.
Proxies are foil cards blanked with acetone and a custom image printed over the entire card, and are not legal for most tournament play. To the best of my ability, I only use my own work, or art that has entered the public domain. For example, 16th century portraits, or Hudson school landscapes.
I only make proxies of cards on the reserved list, with the intent of supporting players that enjoy those formats in events that allow proxies, or casual play at home, but without the standard ugly "marker on a plains" proxy. I personally use mine to prevent wear on my most valuable cards
Alters are real Magic cards partially blanked with acetone. I block off the full name box of the card, and any other part of the original card I wish to keep.
Altered cards are always only allowed at the discretion of the head judge of the event. Checking with them before using them is important. My method does not significantly change the thickness of the card, so hopefully many judges would allow my alters in tournament play.