There are a lot of "How-to's" on making fabric beads on the web, so I won't bother producing another one. I'll just provide a few links to some different methods for creating them. Who knows? Like me, they may inspire you to come up with your own method for making them.
This first link will take you to Cat Morley's "Cut Out and Keep" page where she takes you through the steps for creating her own version of fabric beads. They are truly lovely! This was the tutorial that got me started in making my own. I just decided that instead of wire, I'd use thread and instead of loosely wrapping, I'd sew my beads with contrasting thread.
This second tute takes you to Delia's Place where she shows you how to make fabric beads from cut up strips of fabric. If you've ever made beads from old magazines or newspapers, then you will find these beads very easy to make. Hers are absolutely gorgeous!
And this tute from Clarejosephine on Craftster.org will get you started with a very simple, yet lovely method for making cloth covered wooden beads. In my opinion, any ugly, chipped up or otherwise unusable bead (or even a marble) will do, because they can be recycled and made into something very appealing with this method. I would also suggest using pony beads for the spacers if you happen to have some of those on hand.
And, finally, click the following link to see the necklace that I made that's in my Etsy shop: Kay's Plunder.
I Heart You Necklace
Have fun making your own jewelry with these simple and eco-friendly ideas!