Fill washing machine with economy/half load, hot water, a small amount of detergent, a towel or a pair of jeans [something to provide some agitation in the wash] and the bag. Run the wash cycle, checking every 10 minutes until the bag has felted to desired consistency. You should no longer be able to see the stitch definition.
Thanks everyone! The bottom of the bag is 8 inches square, the walls of the bag are 6 inches tall, and the handles are also 6 inches tall. Next time I make another one, I plan to make the walls of the bag taller, because the bag is a bit shallow, so I had to sew a button loop and button on it for a closure.
I put the bag in hot wash/ cold rinse cycle, and I let it spin dry and everything. I did stop and reset it once, I think, during the wash (agitation) cycle. Another thing, is to make sure you wash it in a top loader that can let you stop and check the felting if needed. If you wash it in a side loading washer, it would be impossible to check.
100% wool would have shrunk more. I used Lamb's Pride which is 85%wool and 15%mohair. If you gals are looking for the pattern, it's in the archives of Knitty.com. Just look under bags... and you'll see the pattern. Have fun!
the final scarf is 24.5in/63cm long and 9in/22cm wide...it's not tight around my neck, and i just buttoned it and let it fall where it wanted to fall...i helped along at some points but i think it's going to end up doing either that, or whatever the wearer wants it to do. i'm really pleasantly surprised by how it came out and i'm excited by it!