Here's a quick tutorial on how to make t-shirt yarn...there are tons of these out there, and you may already know how to do this, but just in case, I'm including this so that you have it if you need it :).
First, take a t-shirt (tank top, piece of jersey knit-the process for this would be different depending on length of fabric). This was a white t-shirt without seams on the sides that I'd cut just below the armpits, removing the hem as well. Next, fold it over leaving about an inch uncovered. Determine how wide you'll be cutting your yarn (an inch or slightly less for thin yarn and up to 2 or more inches for thicker yarn) and cut at even intervals from the folded edge over to an inch from the one edge. You'll be cutting through the top layer that is folded over but stopping before reaching the edge of the bottom layer. You can also simply leave it unfolded and cut across stopping an inch before the edge. However you like :).
Finish cutting across, open it up along the 'spine' (uncut portion) and make your first cut across diagonally from the top cut on the right or left down to the cut below on the opposite side. Continue to cut in this manner until you reach the end where you will cut down to the edge following the shape of the cut above it. Also do the same for the top to create the other end.
At this point all you have to do is pull on your yarn and watch it curl up on itself. The raw edges curl under making this a really easy project.
Finally, decide what you want to do with your yarn! You can leave it as is and simply loop it around and around gathering the ends and knotting them, you can braid or weave them as well (or knit or crochet). To braid, cut into even lengths, attach with the bobby pin (attach the bobby pin somewhere stationary) and start braiding! To determine the length of the braid you need to decide what you'll make with it: a scarf, a bracelet, etc. I always eyeball it.
Ok, now I will say that this becomes a little bit tricky if you have a patterned material that curls away from the pattern/print...meaning the pretty part ends up on the inside of the yarn! This was true of the tank top I used for the scarf in my main blog pic. So, instead of stretching the yarn, I simply braided it with the raw edges showing. This took a bit of extra time because I also was arranging it so as to keep the floral pattern as visible as possible. So there's that. Hopefully, your fabric will cooperate and not give you that problem, but test one end out before you begin pulling it. The other thing you can do, is fold it over on itself right sides together, sew down the raw edges creating an incredibly long tube that you then have to turn right side out. Yeah, I did that too and you'll get to see how that came out later this week!