You've seen those cute sundresses with the stretchy tops right? They are really simple to make. The process is called shirring. Often, it's mistakenly called "smocking", but smocking is a very old form of embroidery that creates a stretchy, pleated effect without using elastic. Shirring uses elastic and a sewing machine to create a stretchy, gathered fabric.
It's deceptively easy to do. The only special tool you need is elastic thread, which is easy to find and comes on a spool.
Full details and instructions are here: Shirring sure is simple!
Company: Warehouse Fabrics Inc Blog