Felting is what I did for the FIRST time last night! What FUN!
Felting is a method by which you break down the wool fibers in a knit item and then they "meld" back together into a more "fabric"-like material. This is used a lot for bags (although mine first go was just a rectangle). You can do it in your washing machine or in the sink. Hot water (and just a tad of mild soap), some agitation and wa-laa.
I KNOW someone will explain this better than I, but in the meantime, just google felting yarn and you'll find TONS of how-to and pix on the subject. Additionally, there are many threads here in the forums where people discuss this topic.
__________________ OTN: Scarf for DD, Cabled Baby Sweater for DS, Tuscany Shawl, test knit for a hat, Hippie Bolero (test knit...being a pain in the you know what)
You may have done it by mistake by washing a wool item too hot and with too much agitation. It shrinks way down. Felting is planned shrinking. :-) It can be used to good advantage to make many beautiful things. You can felt to different degrees, just a little, or so much that the knitted stitches disappear completely. It's another knitting magic.