How to generate an image from text on fly at runtime

Ok, assuming you want to draw a string on an image in C#, you are going to need to use the System.Drawing namespace here:

private Image DrawText(String text, Font font, Color textColor, Color backColor)
{
    //first, create a dummy bitmap just to get a graphics object
    Image img = new Bitmap(1, 1);
    Graphics drawing = Graphics.FromImage(img);

    //measure the string to see how big the image needs to be
    SizeF textSize = drawing.MeasureString(text, font);

    //free up the dummy image and old graphics object
    img.Dispose();
    drawing.Dispose();

    //create a new image of the right size
    img = new Bitmap((int) textSize.Width, (int)textSize.Height);

    drawing = Graphics.FromImage(img);

    //paint the background
    drawing.Clear(backColor);

    //create a brush for the text
    Brush textBrush = new SolidBrush(textColor);

    drawing.DrawString(text, font, textBrush, 0, 0);

    drawing.Save();

    textBrush.Dispose();
    drawing.Dispose();

    return img;

}

This code will measure the string first, and then create an image of the correct size.

If you want to save the return of this function, just call the Save method of the returned image.

Here is Panayiotis' version of Kazar's answer with optional parameters and documentation, suitable for adding to a library class.

/// <summary>
/// Creates an image containing the given text.
/// NOTE: the image should be disposed after use.
/// </summary>
/// <param name="text">Text to draw</param>
/// <param name="fontOptional">Font to use, defaults to Control.DefaultFont</param>
/// <param name="textColorOptional">Text color, defaults to Black</param>
/// <param name="backColorOptional">Background color, defaults to white</param>
/// <param name="minSizeOptional">Minimum image size, defaults the size required to display the text</param>
/// <returns>The image containing the text, which should be disposed after use</returns>
public static Image DrawText(string text, Font fontOptional=null, Color? textColorOptional=null, Color? backColorOptional=null, Size? minSizeOptional=null)
{
    Font font = Control.DefaultFont;
    if (fontOptional != null)
        font = fontOptional;

    Color textColor = Color.Black;
    if (textColorOptional != null)
        textColor = (Color)textColorOptional;

    Color backColor = Color.White;
    if (backColorOptional != null)
        backColor = (Color)backColorOptional;

    Size minSize = Size.Empty;
    if (minSizeOptional != null)
        minSize = (Size)minSizeOptional;

    //first, create a dummy bitmap just to get a graphics object
    SizeF textSize;
    using (Image img = new Bitmap(1, 1))
    {
        using (Graphics drawing = Graphics.FromImage(img))
        {
            //measure the string to see how big the image needs to be
            textSize = drawing.MeasureString(text, font);
            if (!minSize.IsEmpty)
            {
                textSize.Width = textSize.Width > minSize.Width ? textSize.Width : minSize.Width;
                textSize.Height = textSize.Height > minSize.Height ? textSize.Height : minSize.Height;
            }
        }
    }

    //create a new image of the right size
    Image retImg = new Bitmap((int)textSize.Width, (int)textSize.Height);
    using (var drawing = Graphics.FromImage(retImg))
    {
        //paint the background
        drawing.Clear(backColor);

        //create a brush for the text
        using (Brush textBrush = new SolidBrush(textColor))
        {
            drawing.DrawString(text, font, textBrush, 0, 0);
            drawing.Save();
        }
    }
    return retImg;
}

use imagemagick for rendering text on images (on the server)

Since you are in C# you could also use the .Net classes for bitmap and font manipulation directly (with the classes like: System.Drawing.Bitmap and System.Drawing.Graphics)