For those of you who are familiar with Gimp or just want to skip ahead, here are the settings I recommend:

File > Create > Patterns > Camouflage...

 

Image size: 512

Granularity: 10

Uncheck Smooth

Uncheck Flatten image

Click OK


For those that need or want a few things explained:

After opening up Gimp go to:

File > Create > Patterns > Camouflage...

Next a title Script-Fu: Camouflage should pop up.

 *Note that it might show up behind your currently active window so you may need to move things around to see it.

Inside the window are the different settings you can change to edit the appearance of your camouflage texture.

 *Note that unlike the Filters in Gimp there is no preview for these patterns.  So it is mostly just trial and error.

For Second Life 512 x 512px (pixel) is a good size image to have for most builds.  
So change the Image size to 512.

Granularity can be thought of as the number of splotches of each color that will be in your camouflage texture.
I like to keep this at 10 because you can always tile the image later to make more.

Color 1, 2, and 3 are up to you.  Just click on them and the Script-Fu Color Selection window should pop up so you can change the color.  
I like to call this the color picker for short. :)

**How does the Color picker work?
    By default it opens to what I like to call the block version.
    As you can see it looks similar to Second Life's color picker.  
    The only difference is the saturation and the colors have switched places.
    Clicking in the big square will change how vibrant or saturated the color is.
    Clicking along the vertical strip of colors will change the hue or color.
    When you have the color you want click OK.

Smooth simply allows you to blur your image. 

This does not look very good to me and you can do the same thing later with more flexibility.
So leave smooth unchecked.

Flatten image does exactly what it says.

In Gimp you can work on different layers (think of each layer as a separate picture that you can stack and change the order of).

Having this checked would mush the layers down to one but since you can do that later leave Flatten image unchecked.

Now all that is left to do is click OK.

Another window should pop up with your camouflage texture in it.

To view the layers of your texture press Ctrl + L. 

By clicking the eye to the left of each of the layers you can make them disappear. 

Click the same spot (which is now empty) to make them reappear.

You can right click on one of the layers and go to Merge Visible Layers... or you can merge them when you save it as a PNG.

*You can save textures as tga, bmp, jpg, jpeg, and png.  I prefer png because it has a better quality as well as alpha capabilities.

To save your image go to:

File > Save As...

A window titled Save As should pop up.  At the top rename your texture to what ever you want to call it.
After renaming it choose where you would like the it to be saved to.
Then click the plus sign next to where it says + Select File Type (By Extension).
Under File Type scroll down to where it says PNG image and click on it then click the Save button at the bottom of the window.


Go into Second Life then Click

File > Upload > Image (L$10)...

Locate the file you saved earlier then click on it and click open.

Once you see your texture click Upload (L$10)

One last thing I like to do with all the textures I upload is change the properties so that other people have full permission to copy and transfer the item later. 

Find the texture in your inventory then right click on it and go to properties.

In the properties window down where it says Next owner can:  check the boxes Modify, Copy, and Resell/Give away.

Now your camouflage texture is ready to use.  Enjoy!!