I am the parent who lets their kids get cotton candy at baseball games, then discretely eats 1/2 of the bag. Why do I love it? It's yummy, and looks just so sweet in it's pretty pastel colors... you could almost say cotton candy just speaks to me. And now it's actually does!
Typography cotton candy starts with edible wafer paper, the kind use to make cupcake tattoos, which can be purchased at local bakeshops and online. Since wafer paper dissolves in water, to color it I applied a light coat of Wilton's spray on food coloring. The spray works great because it colors the paper without making it too wet.
You can use a stencil for the letters, if you want to make them exact. I can imagine whimsical tables full of monogrammed cotton candy for birthday parties and weddings. (I want to go to those parties!) I cut mine free hand so that I could play with different shapes and find what I liked best.
Attaching the letters or graphics to your cotton candy isn't be difficult, but it night be a little tricky. The only thing needed to attach the wafer paper is a little moisture. Depending on the moisture in the air, the wafer paper may just stick to the cotton candy. If it doesn't stick on its own, you can dip your finger in a little water and dab it on the cotton candy. Just take care not to use more than just the slightest bit of water or it will cause your pretty cotton candy to bead up!
That's all there is to it... now, go and fancy up your cotton candy and make your party a little prettier.