This was my first attempt at felting, and I'm relieved it didn't turn out the size of a doll's purse. I followed a pattern I found here: http://wildyarn.blogspot.com/2006/01/felted-memo-bag-corrected.html
and loved the idea of using quilt bias binding as a strap (which worked very well). It was all done with Paton's Classic Wool, and before felting it measured about 13" by 12". After felting it measured about 8" square. To felt it, I ran it through a hot wash with a pair of old jeans, and it was done after only 15 minutes.
Here's a picture of it closed before felting:
And after felting:
And here's a picture of it open before felting:
And after felting (with the strap sewed on):