This is how I did it.
I took a piece of cardboard, about 3" wide, and wrapped my yarn around the cardboard about 20 times. Then, I took a length of yarn and tied it TIGHT around the top of the wraps (ie. at the top of the cardboard piece.). Then before removing the cardboard, cut the bottoms of the loops at the lower end of the cardboard piece. Remove cardboard, tie another length of yarn around about 1/2" from the top of the tassel, as tight as you can to form that little "ball" at the top of the tassel and voila!!
Hope that helps.