I have the bulk of my fabric sorted into major categories:
Stuff I have a lot of ~ several yards worth of a particular fabric, in large squares suitable for any pattern. All fabrics I like.
Stuff I have some of ~ a yard of a particular fabric or several yards in smaller chunks. Suitable for smaller patterns or in cases where I know I'll want multiple fabrics. All fabrics I like.
Rags ~ bits and pieces and also larger chunks of fabric that I can only ever see using to test patterns, fabrics that I have decided are really awful (sorry, I thought I'd be able to do something with velour, but I just can't) are going to Goodwill.
Goodwill ~ this includes clothes that I bought for their fabric and are still whole, clothes that I thought I might alter, but I'm not, and as mentioned before fabric I just plain hate.
Trash ~ Anything I don't feel right sending to Goodwill.
Clothes I want to make something else out of ~ a fairly self-evident label, mostly consists of projects I did where I made something way too small or did shoddy work (how embarassing!) or just generally have no use for any longer, but there's still a pretty significant amount of fabric I like. Sort of a sub-set of the rags. This also includes things like silk shirts bought for $1.50 at Goodwill.
And finally, things I need/want to sew ~ in the course of this I rediscovered my mending pile. The cool thing is the size-14 pants I stuck in there fit me again.
My goal for this was to have a better idea of what fabric I have available for new projects. I still have a large bin's worth of fabric to go through and I need to figure out which containers (I have a lot of plastic totes*) I want to use for each category. At this point, with some shoving I could very quickly make the craftroom "look" clean, but I've done that before and it really wasn't condusive to sewing projects. It did help my knitting and art projects, but those categories did get sorted properly, because they were smaller.
*Actually part of my motivation for really getting to work on this was getting two new plastic bins when we moved my dh's comicbooks into better storage--cardboard boxes designed to hold them upright so he can flip through them easily--they now take up exactly 6' of shelf space in the soon-to-be office.
) shows a couple of the chairs we recovered for the party. They had been living in the garage, but they are much nicer now, although still ridiculously straight backed.
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