Well, I was internet window shopping and saw these pair of jeans at Urban Outfitters Online. I had to have them but the nearly seventy dollar price tag wasn't too settling so I decided to create the same look myself!
Get a pair of jeans with some spandex in them. Turn them inside out and trace the outline of a skinnier pair of jeans on the inside of each leg.
Cut off the excess material and sew the pants. Try them on and make sure they fit well.
Now look at the original pants and copy the holes. Cut them out with scissors.
Use sandpaper to rough up the edges of the holes.
VIOLA! New jeans :)