Materials:
lint-free rags (old T-shirts work great)
paint tray
plastic tray liner
paper towels
two colors of interior latex satin paint
blue painter's tape
Step 1: Start with a good base
The walls that you are going to rag need to first be painted with a base coat color. Use an interior latex satin paint for your base. If your walls are already painted in a color that will be perfect for your base coat, don't bother to repaint. As long as the paint is not peeling and is free of grease and dirt, it will work out great. After the paint dries, mask off the trim and the ceiling with blue painter's tape before you start ragging.
Step 2: Raiding the rag bag
Go to your rag bag and find an old T-shirt that is long past its prime and ready for a new lease on life. Cut it into a strip that can be bunched up but still fit comfortably in your hand. Other materials will work like old athletic socks, burlap, even plastic bags! Each one creates its own unique design, but we find nothing beats an old T-shirt.
Step 3: Setting up the topcoat
Start by lining your paint tray with a plastic tray liner. (Tray liners work great for clean up.) Pour a small amount of paint into the tray, leaving the top area to dab your rag. Also have a pile of paper towels handy so that you can dab off additional paint during the ragging process.
Step 4: Put the rags to the test
Start by dampening the rag to remove any lint, making sure to wring it out well. Bunch it into random folds and creases (the fewer flat areas the better, because flat areas tend to create heavy blotches). Dip the rag into your topcoat color and blot off any excess on the tray liner and then on some paper towels. It's a good idea to practice your technique on a piece of paper or a paper towel.
Once you feel comfortable with your results, go to the wall. Start at a center point on the wall, and gently press the rag to create an impression. It's best to work in a space about two feet square. The first impressions will be heavier, so you want to space them out a bit. As the rag begins to dry, fill in the spaces between the heavier spots to create a soft blending effect. As you rag, make sure to rotate your wrist to vary the ragging pattern. Bunch your rag periodically to create different textures and shapes.
Step back occasionally to check your work and fill in where needed. You'll need to rinse your rag often to continue a crisp crushed fabric design. Continue in this fashion and work your way around the room until you're done.
Extra tip:
Now, here's a quick tip and a comment about color. To get into corners, try using the tip of a sponge brush, and just dabbing it randomly in the corner to cover some of the exposed basecoat color. This makes for a smoother, continuous look around the room.
For color, remember when you're starting out that the most sophisticated results come from a basecoat with a single topcoat color, preferably from the same color family. I like both light colors on dark, and dark colors over light. Start conservative and you'll be happier with your results.