Here is a picture of one of the photo graduation invites with a circular borders frame and you'll find equipment and instructions underneath.
I get all my materials from joann.com.
1) Kind of obvious really. Just punch away around the sides of the photo with varying size circle punches.
2) Stick the photo with some double-sided sticky tape to some decorative card.
3) I stuck another piece of card onto the back of the photo containing all the graduation invitation details - check out invitation etiquette for your photo invites.
Good luck with your graduation invitations. A photo is the best way to personalize your invites.