1. Take your 5 1/4" squares, and cut them on BOTH diagonals (in an X from corner to corner). You'll consequently have four triangles from each of the 5 1/4" squares.
2. Using the triangles you've just cut in the step above, sew 128 triangle patches using one background fabric and one scrap fabric.
Be sure you lay the background fabric triangle on top of the scrap fabric triangle (right sides facing), and place the 90-degree angle corner under your sewing machine needle to sew the 1/4" seam. This will ensure you're sewing the correct sides together.
3. Next, take your 2 7/8" squares and cut on ONE diagonal.
Using the pieces you cut in step #3 above, as well as some of your 2 1/2" scrap squares, you'll now sew 12 units together that use three different scrap fabrics for each piece. (Sew one triangle each to two sides of the 2 1/2" square.) Also, don't use the same fabrics in the same corners for multiple units as you'll be sewing some of these units together in the future. In other words, keep these 12 units as scrappy as possible.
5. Next, sew 32 units that use two different scrap fabrics in the opposite corners, with a 2 1/2" square of background fabric in the center. Trim all your dog-ears.
For an excellent tutorial/step by step instructions and a video from the Queen of Scrap- Charlotte, visit my fabulous friend- Sandy's blog- Quilting For The Rest Of Us.