Instructables user PenfoldPlant gives a great step-by-step guide to turning photos into coloring book pages using Pixlr, a free online imaging webapp.
The steps are pretty system-neutral and you should be able to figure how to follow the instructions using Photoshop, GIMP, and other image editors easily enough. Once you've mastered the basics of converting the photo to grayscale, inverting the photo, and applying a Gaussian blur, you can add in additional elements from other photos such as the example above that places a child in an island paradise with a treasure chest.
If you're looking for inexpensive, yet thoughtful holiday gift for the children in your life consider creating a short coloring book using this method.
How to Make a Coloring Book | Instructables