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I had a pair of cotton lounge pants that I never wear, so I decided to make a scarf, and proceeded to cut them up.
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The technique I used was similar to
this blog's instructions. Basically what you do is use a zig-zag stitch to surge the ends, while stretching the fabric. That way when the stitch is complete, the fabric pulls back into a ruffled design. I did this to two strips (one, 3/4 inch wider than the other), plus some lighter colored fabric (which I ended up sewing onto either end of one of the strips) to add some depth.
I then layered the two pieces together, folded them in half on top of each other, and surged the center fold into a ruffle as well. I ended up sewing the two ends together to make a double looped tube scarf.
Look at my diagram for a better idea of the layout. It was fun, easy, and I only had to buy the thread. Now that is what I call a bargain :)