When felting yarn, make sure it is composed from 100% animal fibers. Synthetic yarn does not have the scales that is essential for the fibres to interlock.
Silk, although natural does not have scales as it is ahem... an 'extrusion'. Silk can be included as texture or decoration in a felted project but not easily felted on its own.
See my felted items for sale on Etsy at LinbeCraft
Converting natural fibres into fabric or shapes by felting is a fascinating process - unless you have thrown your favourite wool sweater into the washing machine and it has come out 6 sizes smaller!
Wet felting is a process whereby hot soapy water opens up the scales on the fibres and with the aid of friction, they grab and hold onto each other making the mass smaller and denser - hence the shrinkage.
Needle felting achieves a similar effect by mechanical means. Very sharp (I know from the accidental jabbing of fingers) needles that have barbs near the point are stabbed into the fibres forcing the scales to interlock. This means you can sculpt with wool, silk etc. or anything that can mesh together to make shapes, figures and animals.
Felted baskets look so much nicer than cardboard or plastic to store items in, and can be used for toys, handicrafts and other bits and pieces.
Medium sized basket in Drops Alaska. This is the colour way I've used for my how to pattern for sale on Ravelry They are so quick and easy to make! 
This is a a knitting basket made with Drops Big Delight aran (Atlantis) on 5.5mm needles. It came out really well although it needed two trips in the washing machine before I was happy with the density of the fabric.
A basic grey basket. Made from Drops Nepal, a wool & alpaca mix, that although a little fluffier when felted made a nice fabric. You cannot see the original stitches, which is ideal. It is sturdy enough to stand by itself.
Another Drops Big Delight basket. Here you can see how this yarn self stripes. As the felting masks the stitch definition, the 'steps' in the rounds annot be seen. By casting off stitches one round and casting on again next round it is easy to create handles to make a tote.
Make the basket a little larger, add the handles and it becomes a shopping tote.
A small blue organic pod bowl with flowers. Wet felted from roving over a resist.
Orange felt bowl with leaves. Ideal for keys or loose change. Again wet felted in an organic shape - it is not symetrical which adds to its interest.
Wet felted bowl which unintentionally turned out like a little black cauldron on a fire!
Gnomes! these are a good place to try Needle Felting. Learning how to shape the pieces to make up the body, nose, hat and beard. Gnome hats in fact can use both methods of felting - needle felt the basic shape and then go on to wet felt to get the size and appearance.
Click here for a pictorial on how to make a Gnome.