Select a shape you'd like to use as the applique/cover-up patch. I drew this barn swallow, but you can print some clip art or even do a silhouette of your kiddo...random circles might be cool too...endless possibilities here.
Iron the applique to the shirt, covering up the ugly spot. In my case, I should have chosen darker fabric because my rust stain got even uglier from the iron heat and shows through the cover up... just a little.
Set your sewing machine to a zig zag stitch, with the stitch length being close together (I set mine to a little less than 1, because I wanted my fabric to show through the thread a little.)
Lastly, make sure to take a goofy picture, so we all can see your handiwork! Enjoy your "NEW" shirt!