In college, my roommate had a wool sweater that another roommate borrowed, ignored the care instructions, washed and shrunk. Since it fit me, the first roommate gave it to me. I wore it and wore it out, so I decided to give it new life by felting it.
I put it in a laundry bag (an old pillowcase would work, too, but it will be full of fibers), pinned it close and washed it, with detergent, in hot water in a top-loading washer because I heard the agitator is good for the felting process. Then, dried it on hot.
Each sleeve was cut off about 9 inches from the cuff with a circle from the upper arm area and machine sewn onto the bottom to make a wine cozie tied with a ribbon. One sleeve cozie was sent to the friend who owned the sweater originally.
The rest of the body is going to be made into something, maybe a scarf or neck warmer and decorative pillow with big wooden buttons or a change purse.