So, after seaming up the sides of your squares (remembering to leave an open hole at the top), it's time to felt!
You'll find several online articles about felting:
How to Felt (About.com)
Felt This! (Knitty.com)
But the best way to learn to felt, is to just DO IT!
I find that it's a quick, simple process.
I just wait until I have a load of towels ready to wash, and I place my knitted or crocheted item in a little mesh bag, to make it easy to find in the washing machine, then I toss it in with the towels.
I usually do it with older towels, because it needs to be felted in HOT water, with a COLD rinse. The temperature change and the agitation will cause the wool to shrink and turn to a solid fabric.
For our little project, just choose your favorite felting method, and go for it.
I tossed my little project in the wash last night, checking it every few minutes to see how it was coming along. When it was finished washing and rinsing, I threw it in the dryer as well, to shrink and felt it some more. As it was felting, I would put my finger down inside the little hole, to keep the front and back apart, so they wouldn't felt together.
Here's how it looks after felting:
2013 Felted by
Shandeh, on Flickr
KH Felted by
Shandeh, on Flickr
I really want it to felt a little more than that, so I think I will run it through another wash tonight. When I first finished my squares, they were about 4 inches across. After felting, they are a little over 3 inches across.