Wool fibres are springy and they have a surface covered in scales. The tips of the scales from one fibre can lock with scales on other fibres. In the felting process a tangle of wool fibres is made moist with water then heated and pressed hard together. The fibres squash together and they form a dense mat. They are not arranged in yarn or woven or knitted like other fabrics.
In the past felt used to be used for making hats. It was also used as a sheet between a carpet and the floor to make the carpet more comfortable to walk on. This is called underlay. Today you are most likely to see felt on a snooker, billiards or pool table.