I do not know what matterial they use for felting or making penny rugs. Is it just normal felt you buy by the yard and can be used for crafts? Any one have any ideas? Sorry for the dumb question.

Most people use wool felt, either a wool blend or a 100% wool. Some buy regular wool fabric and make it into felt (I think you just put it in a hot washer and dryer). I don't think most people use the inexpensive wool (acrylic) that they sell in squares at walmart or joanns or by the yard.

They use woven wool fabric that has been felted - usually by machine laundering in hot water, rinsing in cold, then dried in a hot dryer. Most craft felt is NOT wool, usually a poly or other product, not really meant to be used for penny rugs, etc.

It's not the normal felt that you buy by the yard. Wool felt is quite expensive and can be hard to find. I think that's one reason why a lot of people purchase wool garments at thrift shops, take them apart, and run them through the washing machine and dryer to felt the fabric themselves. Or, you can buy 100% wool yardage and process it at home the same way. The agitation with soap and the dryer work to get the wool fibers (which have little hooks on them) to interlock tightly (the fabric shrinks a *lot*). Once it is felted like that, you can cut it and the edges don't ravel -- so decorative stitching is all that is needed; you don't have to worry about turning under edges or fusing.