Let's see. I only know if two ways to cut vinyl. First, which is very uncommon, is to use an exacto knife and freehand the entire sign (vinyl decals are also reffered to as signs).
The more popular method is to use a programmable vinyl cutting machine. You just tell it what you want to cut, and it'll cut it! Most of the time it's easier to just buy vinyl from a custom shop because vinyl is sold by the yard. So unless you plan on cutting lots of the same colored signs, I wouldn't do it.
Let me know if you have anymore questions, I would be glad to answer them! Be sure to check out the 'How to apply vinyl' video my TARC team made on our fundraising site, rocketguts.com Go to 'Instructions.'
If you are referring to printing decals on clear or white vinyl:
I have made my own decals on several projects with great results using a standard inkjet printer.
You do have to purchase special vinyl decal paper specifically for that use.
Check around on the internet, Do a search for "vinyl decal paper"
VERY IMPORTANT after printing your decals allow time for ink to dry (I wait over night) then spray decal sheet with a coat of clear matt paint. This will keep your decals from smudging.
I cut mine out with a sharp pair of scissors.
You can do really good straight lines using an exacto knife. Use a clean piece of glass for the base (we salvaged one from an old picture frame), use a good straight edge, press firmly, and (very important) don't stop cutting once you start.
I like using this rule--it's clear so you can see through and has agrid to line/square up. It's durable; I haven't ever cut into it and that's I've used a rotor cutter for quilting, a utility knife, and exacto knives.
This has been the straight line cutting method of choice at our house for years.
I believe they can both do custom designs but if it's for rockets go with waterslide except for the very largest of decals. Personally I hate vinyl decals at least of the type that Estes supplies. The decals from the above links are probably a better system but I have no experiance with them yet. No doubt they are more expensive too.