If you haven't tried it already felting puts a new spin on what you can create with knitting. Bags, hats and footwear are popular items.
Felting is not as difficult as it might seem. Simply choose the right yarn (Brown Sheep and Noro Kureyon are favorites) and knit up an oversized item. Then felt to the right size!
One great feature of felting is that the process covers up most minor mistakes, making it suitable for the less than perfect knitters among us.