Super simple to make and so simplistic! But, you could go crazy with stencils, stamps, pastes, embellishments - anything to personalize your style!
I decided to go humble for this scene. All you need are some wood blocks (at my craft store, they have packages of whittling blocks), a small peg person, and wood knobs for the heads.
For Joseph, I just ran a distress ink pad over the wood, leaving it rustic looking. Then just glue on his head.
For the angel, I quickly painted it white, added some distressing, cut out/glittered my wings, and added a belt for the angel's robe.
For Mary and Jesus, I again went over her with a distress ink pad. Then I added burlap for her head covering. For Jesus, I wrapped him in a piece of burlap which is secured with a rusty pin.
I could envision making sheep, too: take a block, add white paint and cotton balls or batting, then lay it horizontal and put the head at the end, maybe some buttons on the bottom for feet. Or how about painting them metallic! You could also add the wisemen! Lots of options!