
Step 1: The background image made by the artist.

Step 2: The completed menu using the above background image.
There are a couple things to keep in mind when making DVD menu artwork:
(1) SIZE. For NTSC DVDs, the background size should be 720x480. For PAL DVDs, the background size should be 768x576.
(2) TV SAFE AREA. See the picture below:

Anything outside the dotted lines will be cut off the screen on larger TVs. But on smaller TVs it won't be cut off, so you will still need to have something there (don't leave it blank). Just don't put anything important (like text) outside the TV-safe area.
(3) CREATIVITY. Remember that the image you are making will be the background; not the primary focus of the menu. So you will need to leave space somewhere for the DVD author to add things (buttons, menu titles) on top of your image. Don't be afraid to settle for an image that might look "empty" or "simple" by cover art standards.