It's very easy. I've made hats, scarves, an afghan made of knitted panels, a lapghan with a large "sleeping bag" like footy pocket (my husband asked for a lapghan with a bag for his feet to keep his legs warm)."
I didn't buy any of the books, but Amazon has at least 7 pattern books (at the end of this post). Michael's usually has a couple. I've browsed through a couple of them. There are also alot of free patterns online, and a couple Yahoo Groups.
I've seen patterns for purses, pillows, slippers, baby sweaters, stuffed toys, shawls.
There are also websites of peole who sell fancier knitting looms (made of wood, and with pegs placed at closer intervals). My favorite is
http://www.decoraccentsinc.com/ (though I haven't bought anything from them yet). I want their sock loom and infinity afghan loom very badly.
Some of the more experienced loom knitters claim there is very little that you can knit on needles, that you can't knit on a loom - with the right loom.
There are also You Tube videos
(the amazon books, I mentioned earlier)
Learn To Knit On Circle Looms
Loom Knitting Primer
Knitting Wheel Fashions
Loom Knitting Pattern Book: 38 Easy, No-Needle Designs for All Loom Knitters
Learn New Stitches on Circle Looms
Learn to Knit Cables on Looms
More Knitting Wheel Fashions