Texture Stencil

For the Cycles Renderer version of this, go here: Texture Masking - Cycles

The first part of creating a stencil or texture mask is to create the mask image.  This is commonly done with a grayscale image.  In our example, it will be a simple black and white image drawn in Blender.

To create a simple mask, select the object, in our case, the Plane, and switch to Edit Mode [TAB].  The easiest way to unwrap a plane for UV mapping is to get to an orthogonal view (in my case from top view [NUM7]) and unwrap the plane using the Project from View.

In the UV Editor window, simply create a new image which will default to a black background.

Now with this new image mapped, switch back over to the 3D Viewport, and change the mode to TexturePaint.  In this mode, you can paint directly on the mesh using the Tools [T] pallet.

I painted a simple swirl with a white brush.

Back in the UV Editor window, make sure to save the image.

Now on the object (our plane), create a new material and a new Texture.  Note that two textures will be required, one for the mask (stencil) and one for the underlying image.  For the stencil texture which will act as the mask, the two main fields to check are RGB to Intensity and Stencil.  This will essentially turn the image into a mask, where white passes the next texture through, and black blocks.

For the underlying texture, the settings aren't important, but I simply made a red noisy texture from the internal Clouds image.

 The final render shows the red coming through the mask, on top of the base white material.