Cast on 30 stitches in the yarn you are swatching, on the needles you are using. Knit three rows of garter stitch, then hold 3 stitches on each side of the piece in garter stitch, and knit the center in stockinette. The pattern for this is RS – K3, k24, K3, WS – K3, p24, k3.
Knit in pattern until the piece is 4 to five inches long, then knit another three rows of garter stitch and bind off.
Block the swatch very gently – nudge it carefully into as true a rectangle as you can without stretching it. This helps ensure that the gauge it reflects will be accurate.
It will look a lot like this:
This swatch is knit in worsted weight yarn (Galway Highland Heather) on size five needles. It’s stitch gauge is 5.5 – 6 stitches an inch, and it’s row gauge is 8 rows an inch.
This makes a nice sized swatch – the one in the picture is 5 and a half inches by 4 and half inches. The garter stitch edging helps keep the stockinette from distorting, making it’s gauge more accurate, as well as easier to read.
To read the gauge, I use a tape measure, and carefully line it up along the row or column, then count the number of stitches per inch — I read the gauge in at least three places, to ensure that I am knitting evenly — on this swatch, my row gauge is good, but my stitch gauge varied slightly, so I know need to account for that when I knit. Since I am making up my own pattern (pretty much) I can account for it by adjusting how many stitches I cast on, rather then trying to change needle sizes to get gauge.
And now I am ready to start my knitting. The project that has prompted me to this unusual level of precision finickiness?
A plain ribbed hat.
Knit-Write 
Very good explanation on knitting a swatch! You are so detailed…