Step 1: Pick something you like.
Step 2: Think of as many ways as possible to make it better, more efficient, more durable, cheaper, longer lasting et cetera.
Step 3: Which solution from step 2 are your skills or connections the best fit for?
Step 4: Figure out the least expensive way to get a prototype in front of potential customers.
Step 5: Note feedback from step 4. If necessary, incorporate it into your solution and go back to step 4.
Step 6: Profit.
(Step 7: Contribute.)

Information on funding resources:
TheFunded.com: A site for entrepreneurs to share experiences with funding sources

Crowd-sourced funding platforms:
Kickstarter.com: A site where users can propose projects and the public can pledge funds to them
IndieGoGo.com: A competitor to Kickstarter

Loans:
Prosper.com: Lend or borrow money at varying rates.

Angel Networks:
Tech Coast Angels: A southern California network. Free to pitch.
Keiretsu Forum: Networks of angels in LA, the Bay Area and the Pacific Northwest. They charge around $6000 to present to multiple regional chapters.
Maverick Angels: A network of angels in southern California. They charge $1500 to present to multiple regional chapters.
Open Angel Forum: Jason Calacanis’ free forum to pitch angels. It was catalyzed by the large fees some networks charge to pitch.
FundingPost: Events that match investors with entrepreneurs

Mentor Networks:
The Founder Institute: An international program pairing entrepreneurs with mentors over a semester long course

Pitch help:
Startup Nation Elevator Pitch: Help putting together an elevator pitch
OmniDazzle: A plugin (OSX only) that helps jazz up presentations
Prezi.com: A website that allows creating visual map presentations.

Twitter:
VentureHacks: Advice for startups from some of the investors in Twitter. Their AngelList is a great resource too.
Mark Suster: Los Angeles VC looking for passionate entrepreneurs