These decoration were made for my friends' children, using a felted swatch of Cascade 220 held double and knitted on 10mm needles. Once the swatch was felted I just cut out the desired shapes, embroidered on names and other patterns, and added ribbon for hanging. You could use any bits and pieces from your sewing kit to embellish these. I found some sequins and a small brass bell to make mine more interesting.
Please note I used the reverse stockinette side as well as the stockinette side of the swatch to give the decorations a different look.