clipped from: crafts.lovetoknow.com 
A crochet rag rug has a special place in the hearts of people who love country style in their home. These rugs were created in grandmother's day to utilize scraps of fabric and worn out clothing. The cloth was cut into strips, sewn together, and then rolled into a ball. When there was enough material, it would be crocheted into colorful rag rugs. This project was something that every frugal homemaker did.
When all of the fabric has been turned into strips, begin to sew them together at the ends. With right sides facing each other, place the ends at a 90 degree angle and sew from corner to corner. Use a ΒΌ inch seam allowance. This creates a bias seam.
Turn the raw edges into the middle of the strip. Some people do this as they are rolling the ball into yarn and others press the edges to set them. Whichever way you prefer is fine. Once all the fabric is prepared it is time to crochet your rug.