Felt it, felt it good.

There's some great information about felting at Knitty:

Felting for beginners by Kathy Wortel
and
Felt this! by Rob Matyska.

I just took the Pink Bunny out of the washing machine and it had felted a bit too much - likely because I had knitted it larger, using larger needles. Felting (well, fulling really - read the second article) requires having a bit of space between stitches, so smaller, more tightly knitted things full less than larger, loosely knitted things. And remember: you can always full more, but you can't unfull. ;o)