I get asked this a lot! Sometimes there is no obvious answer - ideas do literally pop into my head, just as I am going to sleep is a popular time! Having said that I do find inspiration in the most unexpected places - a news headline about the swine flu, including a photo of a highly magnified virus, gave me the idea to make the virus family.
This plant was inspired after playing Playstation Batman Lego - The final 'baddy' to beat was a rather impressive venus fly trap - though this one ate lego bricks!
I find children's books are a great source for ideas - the pictures are often quite 'simple' with great colours. I also take loads of photographs and have an impressive collection of postcards that give me ideas for shape and colour. Kids TV is another great resource (also gives me an excuse to watch cartoons!)
I then have my own design consultant - my 7½ year old daughter!
Here is the finished article!
More often than not though I just pick up a fistful of wool and needle away! So keep those eyes open and your next project may be staring right back at you!