Here are some steps on how to decorate cupcakes:

1. Allow cupcakes to cool completely before attempting to spread the frosting.

2. Make a frosting palette. Put vanilla frosting in several small bowls, and add a few drops of food coloring to each to make a variety of colors. Or choose a flavor palette, drawing on the traditional chocolate, vanilla and strawberry or any favorite flavors of your own.

3. Use a frosting spatula to ice the cupcakes thickly. You can alternate icing colors or flavors to give guests a choice, or combine them in stripes and swirls.

4. Top the cupcakes with your choice of candies, fruit, streusel topping, coconut, chopped nuts—even edible flowers. Press toppings lightly into the icing.

5. Refrigerate decorated cupcakes until ready to serve.
Source(s):
http://www.ehow.com/how_2053804_decorate-cupcakes.html

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START: When your cupcakes have cooled completely, start with about ¼ cup of frosting piled high in the middle. Using an offset spatula or a butter knife, spread the frosting down from the center out to the sides of the cake. Place the cupcakes in the fridge or freezer for 5-10 minutes. That way crumbs will stay put and not become flecks in the icing.

SPREAD: Take the cupcakes out of the refrigerator. Begin with a clean spatula or knife, smoothing the sides of each cupcake first. Use your other hand as a turntable. Smooth about an inch at a time. Scrape your knife or spatula clean on the side of the frosting bowl after every swipe.
SMOOTH: Finally, smooth the frosting up from the sides to the top of the cupcake. Again, scrape your knife clean after each swipe.

DECORATING:
Instead of frosting: you can cut small, heart-shaped stencils from parchment or construction paper. Place one or more stencils on top of an unfrosted cupcake and, using a sifter or small strainer, dust the top with powdered sugar. Remove the stencils. Or try candy sprinkles and pieces, colored sugar, chocolate-covered strawberries or nuts.

Coconut topping: Fill a small, shallow bowl with flaked coconut. Hold the frosted cupcakes upside down inside the bowl and gently press the top and sides into the flakes.

Chocolate topping: Use a vegetable peeler to shave a bar of chocolate or white chocolate. Place the shavings in a bowl and press the top and sides of the frosted cupcakes into them.

Fondant hearts: You can buy ready-made fondant icing or make your own (there’s a recipe on chron.com/food). Simply roll the fondant out and use a sharp knife or small cookie cutters to cut out hearts. Place the hearts at the peaks of frosted cupcakes.
Source(s):
http://www.chron.com/disp/story.mpl/life/food/side/6254423.html
http://www.marthastewart.com/cupcake-recipes

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