Supplies:
Yo-Yo Template (by Clover, 4" template)
Scissors
Fabric
Needle and Thread

First, place your fabric in between the two template plates (they snap together.)

Next, trim the fabric.

Then sew in and out of the holes in the template.

Remove template from fabric and pull the thread, making the fabric gather and the yo-yo forms. Tie the thread and flatten the yo-yo. I like to place a button in the center.

You can make these without a template. Simply trace the circle on the back of your fabric, fold down the edges and stitch.
This is a really neat thing to do while sitting on the couch watching a movie. There are oodles of things to do with fabric yo-yos. (like put on quilts, purses, and even create yo-yo animals). Have fun! I'd love to see your designs with yo-yo's.
Here are a couple of things I did with fabric yo-yo's.

Supplies
Cardstock: Bazzill; Patterned papers and Bingo Card: Jenni Bowlin; Stamp: Inque Boutique: Ink: Clearsnap. Fabric and buttons.

Supplies: Cardstock: Bazzill; Patterned Paper and Die Cuts: Cosmo Cricket; Stamps: Paper Salon; Ink: Ranger; Felt Flower: Fancy Pants. Other: Buttons, Fabric, Buttons, Twine.
Some tips for yo-yo making: Look for remnants. My fabric store has a barrel full of scraps. They will give you a small baggie and you can have whatever you can stuff in the baggie for $1.00. If you have an idea of what papers your are going to be working with, you can coordinate. In the pink and brown scrapbook page (above), I knew I was going to be working with that paper line and when I spotted a gorgeous pink and brown fabric in the scrap pile, I knew that would be perfect. Another tip - don't assume the fabric design won't work. Stripes and argyle make interesting yo-yos when they are gathered. Give it a try!
Happy creating and have a wonderful week!