Get a laserjet photocopy of the image you'd like to use in the correct size to fit your fabric. Use a craft knife and carefully cut out the image. Trim off any excess white around the edges, otherwise it will also transfer to the fabric.
Protect the work space using wax paper. Also, lay a sheet of wax paper inside the pillow cover so that the back of the pillow cover is protected. Brush a thick layer of transfer medium over the image. Use enough so that the image is obscured - just obscured.
Lay the paper (glue-side down) on the fabric. Smooth out any bubbles in the glue using a squeegee and clean up any of the medium that extends beyond the paper. Allow the glue and paper to dry for 24 hours.
Using a damp rag, moisten the paper. After about a minute, use a damp sponge or rag and gently rub the paper off in a circular motion to reveal the image.
Once all of the paper is rubbed off, let dry. Add a pillow form inside the cover.
Video
Notes
The key to a successful photo transfer is to work slowly and carefully so you do not tear or rub the image off.