Here's a fun way to make hand-crafted fabric ornaments. It is very similar to the way I make hand-quilted eyes for my stuffed animals (you may want to review that post first). They can be made from leftover scraps, and they make another nice portable project.
First, decide on a base layer of your ornament. I like to use felt as my sturdy back layer.
Then cut out layers of colored fleece, cotton, or felt to stack into an eye design, from largest to smallest or vice versa. Fleece and cotton fabric will probably fray more, but may give you more color options. The larger/background colors are sewn first, with each smaller layer stacked on top and sewn individually.
I like to use a matching thread to sew each color into place. You can still see that each layer is hand-sewn, but the stitches don't disrupt your design too much. But any complimentary color will work. Knot each thread on the back of your panel so that the ends won't show through when the two panels are finally sandwiched together.
Lastly, add quilted felt eyes, or beads, or embroidery thread, for extra flair. Remember to leave a felt edge surrounding eyes, to make stitching the eye into place easier (using a dark felt base for the eyes also creates a nice bold outline that helps your eye design to pop).
Once all of your embellishments are in place, stitch a ribbon loop into the top edge of one of your panels, about a quarter of an inch in. Be careful to keep these stitches from piercing through the outermost layers of fabric, so that you do not disrupt your design, but use several stitches to securely attach the ribbon.
You now have two finished panels, like so:
You can then stitch the two panels back to back, along their felt borders. I like to use thick black embroidery thread.
You can pull your thread ends through a bead and knot them with ribbon as an ornamental accent, or hide your thread ends in your stitching.
Keep the back panel plain, or create a double-sided piece:
As you can see, these techniques can be easily adapted to make decorative Christmas tree or door handle ornaments for any season. Felt quilting can also be easily adapted for craft projects with children--all you would need would be colored felt, embroidery thread, and those blunt plastic embroidery needles, materials that can be found at most craft stores.
Have fun experimenting!