Here are some simple instructions: So you'd like to... felt a bar of soap This article gives good basic instructions and links to lots of felting books.
My own personal observations are that it pays to go slowly and take care when first wetting the wool. Wrapping is key -- make sure NONE of the bar of soap is showing. I prefer white wool batting to trying to wrap it with roving. Batting works much better. It's also cheap! Then take little bits of colored roving and place it on top to make a design (like a small flower) or use colored pure wool yarn to wrap around your wool (this helps keep the batting in place and also felts in to the finished product and creates a swirly design).
wool batting from A Child's Dream Come True
Once you have your wool wrapped securely around the soap, hold it in one hand and gently sprinkle it with very hot tap water using the other hand. Do this until the entire project is very wet on all sides. Now, BEFORE you begin to rub vigorously, go around with your fingertips and make sure all the wool is touching itself. For example, if a little bit of wool is sticking out at an odd angle, it will felt that way and you'll have to cut it off later. The wool should form a smooth surface all around the soap. If you need to rearrange it and gently pat it smooth and rewet it, this is the time!!!!! It should encompass the soap like an organic piece, not bumpy, not lumpy, not gappy, not flappy. Like the peel on an orange. Then, you can dunk it and begin to rub with your hands until it's tightly felted and bubbles from the soap are starting to work their way through the outer layer. This is fun and easy for kids from preschool on up.
I used to dislike wet felting immensely because I felt like I never had enough control over the finished product and my felt always had gaps and holes in it. Then I learned that this is because the wool felts (locks together) much more quickly than I had previously thought, so it was locking up early on in a shape that I didn't want and I didn't have any way to make changes. Once it felts, it's done! All you can do from there is... well... nothing. You're stuck. With the soaps, though, you can put on another layer of wool batting around your mistake and go at it again. So it is a good project for beginners. Just make sure you have it the way you want it before you add all the friction from the vigorous rubbing.