For lavender that will look good dried on the stem, harvest when the buds have swollen and taken on color. It's fine if one or two flowers have opened on the stem, but it's best if no more than that have. Cut the stem long, down where there are a number of leaves at the base. Don't cut below all the leaves, but it's ok to cut some of them on the stem that you'll strip off later.

As for method, scissors work fine, or a short pruning knife. If you're harvesting a lot of lavender for sachets and such, where the longest possible stem length isn't so critical, you can use a hand sickle or grass hook. But if you're using a pruning knife or a grass hook, protect your non-cutting hand, the one that holds the stems taut, with a glove. The cheap woven ones with the rubber dots on them seem to protect well enough while still allowing you to feel the stems. Again, if you're using a knife or a sickle, work softly and smoothly, just gently drawing the blade across the stems.

For good fragrance, you'll probably want to wait until one or two flowers are open. At that point, the essential oils will be well developed in the buds and you won't gain or lose much from that point until all the flowers on the stem have bloomed.

For potpourri and especially for sachets, lavender pillows and lavender bottles/wands, you can harvest somewhat later, since looks aren't as important and you're either taking the flowers off the stem or hiding them inside wands.

For dry potpourri, dry the lavender and strip the flowers from the stems. Dry some rose buds or petals, some fragrant leaves like rosemary or lemon balm, some pretty but not necessarily scented flowers like strawflowers or gomphrena. Dry some orange or tangerine peel. Mix everything together, adding some spices such as clove, cinnamon, allspice or a mixture like pumpkin pie spice. Add some fixitive -- orris root is one that you can find from herbal suppliers on the net. Add a few drops of essential rose oil and, if you wish, a drop or two of essential lavender oil. The essential oils are used because this kind of potpourri is put out in the open, where scents dissipate quickly, and because even scented roses lose their smell quickly unless they're actually fermented -- the original "rotten pot" method for potpourri that makes a great-smelling but foul-looking product. Blend everything together to suit your own taste, smelling ads each element is added then leave it for a few days in a closed container for the smells to develop, then smell again and decide whether you want to add a bit more of anything. You can wait until this point to add the fixitive and oils if you wish.

Our harvest has just started, with some Hidcote that we use in purely decorative pieces, so we're cutting them when the buds are full and will stop cutting when they've got several open flowers on a stem. Then we'll go back when the productive harvest is over and shear off the stems to get the plants back into shape.

Good luck with your harvest!