You could also use paper. It tears away easily. Couldn't you make circles and applique them to a square of fabric. Alternate between circles and squares.
Oh, there I go again with more ideas and now I want to try it. I love the scraps, they are so colorful.
On Mossuri Quilt show they have where you make a swuare using strips and then cut a circle from it and use the cirlce for one blocks and use the outside tht is left over for another block where you could do applique. This is what gave me the idea but why couldn't you do it with small scraps also.