Feye's method

That IS a good idea...my method really would be easier if someone else did it, instead of a person doing it on themselves where they can't see as well (though I'm guilty of doing it).

I can't imagine a scrunchy method for cutting layers that wouldn't come out seriously steppy (maybe its just my lack of imagination though).  If I wanted to do that, I'd do the blunt cut with the scrunchy, then add layers by picking up sections and holding them out from my head horizontally, then cutting vertically straight up (so you're cutting across the hair near the bottoms, but when you drop it it will fall in a graduation downwards.  Is that making sense?  I will try to explain better if its not. 

The trick there is when you hold your hair out and cut across the bottom (which will be with your scissors pointing straight upwards), you need to make each cut the same distance from the ends (the same number of inches) to make your layers look even.  If you don't cut the very bottom layer, it will still be straight across on the bottom, but you'll have layers in it. If you do include the bottom layer, this will give you a more jagged, all-over-layers cut (I've seen that on a lot of people lately as well).

A tip about layers, since we're on the long hair board. Although they're the big fad right now, they do make hair look thinner.  This may be what you want if your hair is very thick, curly or wavy, (it can add a nice taper to curly long hair) but will thin hair out if its reasonably long and also straight.