I love combining felted (shrunk) knitting with regular knitting. The felted area gives the project more body because it's thicker. I've been designing these little project bags and have made several. The bottom is felted so it stands up and the top is knitted. The decoration "curly cues" are needle felted on the bottom, to add a bit of pizazz.
Because I name most of my projects I named this bag Arizona. It just has that South Western flavor to it. Made of wool and the bottom has a bit of detail about 3" of a Moebious then decreases to make the narrow part. When I want it to sit on it's bottom the point tucks in and it sits flat. Perfect for a little sock project on the go. Just the right size to hold a ball of yarn.
My xxx zig zag stitch is added for holding the needles and keeping the stitches safe. (I made a little video demonstrating how to do this stitch here.) The bag is attractive and practical, it turned out well.