I love bobbles and once made a whole cardigan using this stitch for one of my nieces. They were like little pink rosebuds. Basically you knit a panel stocking stitch (one side is knit the other is purl) and you make bobbles that seem to "sit" upon the knit. I have chosen to space mine 12 stitches apart and 6 rows apart keeping the rows alternate and I have cast on 54 stitches. You can make what ever size you like.
Generally the bobbles are made from multiples of three or more commonly five stitches and can be made in one of three different ways.
The method I have always used is to knit into the front of the stitch then knit into the back, then into the front and then into the back and one last time into the front.....then you have five stitches. Turn the work around because next you purl these five stitches (keep the tension loose). Then turn again and decrease all these stitches back to one again by knitting through all of them at once. It's a bit tricky but it's the bobble I like best.
Another method is here in this video tutorial. It uses the continental method (which I can't follow) but her method for the bobble looks a little easier but a bit looser too. Here is the link to e-how make a bobble.
If you are new to bobbles and find five stitches a challenge, try working with three stitches for a smaller bobble.
This will knit up a really interesting 3 dimension square for your rug/project.
27.07.10 - If you would like to see a really beautiful project for bobbles and scrap wool, check out Killiecrankie Farm blog and drool over these beautiful coathanger covers.