felted balls are made with wool roving- ask at your local yarn store, they would know where to buy them locally- but there are a TON of sites on the internet!!
buy undyed wool *you could use batting or roving* for the base of the ball and a bit of dyed wool just to cover it with color-
they are really really simple to make- you could even make them in the washing machine!! but- more fun to make them felting by hand. just take a bit of wool at a time, and smoosh it in your hand to form a ball, with hot water and a bit of dishwashing soap, i use Dr. Bronner's lavender soap..... keep adding on bits of wool to enlarge the ball, smooshing as you go- the wool should felt. try shocking the felted ball with cold water every once in a while to help the felting process. when you're satisfied with the size, add dyed wool roving..... keep on smooshing til it's all smooth- it WILL get there!
you could also add a little jingle bell in the middle when you start the ball.
enjoy!