This is one of the cutest things I've discovered in a while -- a dog collar made from a recycled shirt!
The craft is presented on www.craftbits.com and you can get the instructions for it here.
I'd be a little careful with the embellishments you add to the collar, in case your dog is one that likes to eat things besides food.
And right now, my head is trying to figure out a way to work in a mini recycled necktie.... I'll post again if I come up with something.
Craftbits.com has a wide variety of other craft ideas complete with photos and instructions, all neatly categorized.