Yes sunny this is what you would use for clothing. (And some fun tote bags or hats and scarves too) There are some nice patterns available on the market today for the fleece. Little jackets are my fav. And you can embroider onto it very easily to make it special.
It also is a good thing to use for baby blankets because it takes hard washing and won't pill. Nice stuff. Just use a all purpose needle and a heavier poly thread. Very fun to play with.
Edited to say that this is what some people use for raw edge appliqued items that they want to be fuzzy. (like lambs or chickies)