This pattern came from a great book called "Stitch'n Bitch - the knitter's handbook" by Debbie Stoller, knitted on the round. I used sock wool and 3mm needles, so I had to alter things a bit from the pattern.
Basically cast on as many stitches as needed to achieve the 16 inch circumference (104 for my knitting, wool and needles, but I had to knit a few rows, then undo it and start again to work that out...). Knit plain until you have a 5 inch tube.
Then I knitted my stitches into 4 groups of 26 stitches (or 8x13 stitches) divided onto double pointed needles. Then start to decrease each group of 13 by knitting together the last 2 stitches of each group - ie first row - knit 11 then knit 2 together, repeat to end of row; 2nd row - knit 10, knit 2 together, repeat... etc.
When you have about 16 or 8 stitches left, it's easier to go to just 2 needles, then knit 2 stitches together until you have 4 stitches left. Knit "umbilical cord" for about 6 inches or until you think you can tie a good knot in it. It's a bit tricky to knit such a small number of stitches on the round on double pointed needles, but it all evens out eventually. Cut off wool at end, and thread through each loop and tie thread off in knot. Sew ends into inside of cord.
You can make one without umbilical cord by just reducing stitches to 4 and tying off.
Very nice to knit, while doing other things, and my friend says knitting in the round is very good for buses, as your needles don't stick out too far!!