When I was younger, my siblings and I used to weave 'pot holders' on a little plastic loom. I had nearly forgotten about them until recently while visiting my parents. My mom brought out a couple looms for Chance to play with. He had alot of fun picking out colors and stretching the fabric loops over the pins.
You start off by stretching loops from pin to pin in one direction, and then weave loops in and out in the other direction. You finish by pulling the ends of the loops through the loop next to it, all around the perimeter.
I love to find things for Chance to do that allows him to be creative, and to make something useful. He likes to give little gifts to people he loves, so this worked out great! We made a 'John Deere' one for Chance, a blue, white and yellow one to match grandma's kitchen, and a small purple and pink one for great-grandma's coffee cup.
I'm not sure if you can find these is local stores, but I did find quite a few on Amazon.com. It would also be fairly easy to make one on your own. Let me know in a comment if you would like me to do a how to post aout making your own pot holder loom! I hope you all have fun with this!