Before beginning any upcycle project with wool sweaters, you need to felt the wool. This is done so that you can cut and sew the wool without it unraveling. It involves washing 100% wool sweaters in hot water, so that the wool shrinks and creates a tightly woven fabric. For step-by-step felting instructions, check out this excellent article by Patricia Oliver.
When looking for sweaters to upcycle for a craft project, you should choose 100% wool sweaters and be sure that the tag does not say “superwash.” Wool mixes will not felt as nicely. Any sweater labeled “superwash” has been chemically treated to avoid felting.