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Good idea. I sometimes use plastic bag "ribbons" for tying up gift packages, too.

Great way to keep all the bags organized and not floating loosey goosey underneath the sink.

Reminds me of the fabric scrap balls I saw in Brimfield:

http://donkeehouse.com/?p=1044

Instead of throwing scraps of fabric away, store them this way in a ball, then when needed, use them for a belt, as a headband, for ribbons and gift wrapping, etc.

You lost me at the "loose knot" part. How are the loops knotted together?

Very nice! I did some knitting with plastic bag strips back in college, but I realize this folding and cutting technique is a faster way to make the "yarn".

I followed a great tutorial on Creature Comforts to make a grocery bag pom-pom to decorate gifts: http://thegiftedblog.wordpress.com/2009/08/05/tutorial-tryout-grocery-bag-pom-pom/

A straightforward and satisfying project; no knitting knowledge required!

I'm also not clear on the loose knot - to - tight knot for continuous plastic thread directions. So you have these 1-inch wide loops of plastic. Which 'ends' do you pull at to make loose knots? Does it involve interlocking 2 loops?
Apologies if purlgreyhound and I are missing something obvious.

Re: loose knot, looks like you are looping a piece up through another one and pulling tight, similar to how a larks head knot looks when done.

You can also make yarn in one long piece of plastic bag: http://www.wikihow.com/Prepare-Plastic-Bags-for-Knitting-or-Crochet

This is how I would connect the strips: http://www.marloscrochetcorner.com/bag%20cutting%20instructions.html