Simply put, felt is matted wool.  Wool becomes felt when it is subjected to moisture, heat, and pressure.  In fact, if domestic sheep were not shorn, over time their wool would felt or "cot."   Hot soapy water makes the wool slippery, and causes tiny scales on the fiber to open up. The scales prevent the fibers from backing up again after they slide across each other; with agitation, the fibers get hopelessly tangled together.  When cooled, dried and compressed, the scales close and lock the wool into the tough, durable material we call felt. 

The modern manufacture of felt is, as you might expect, a bit more sophisticated than this description.  The variety and volume of wool used, the addition of other fibers, the different "wetting" agents, the amounts of heat and pressure applied are just some of the factors that affect the final outcome.  Ultra-thin or inches thick…velvety soft or hard to the touch…felt is a material of incredible versatility and utility!