I saw UK based Eleksen at the CES 2005 and was quite impressed what fabrics can do these days.

Jackets with fabric buttons to control MP3 Players are already on the market. Eleksen also makes those. Another fun application are fabric sensors in recliner chairs. The Eleksen fabric senses pressure and stops the chair when it would start flatting the dog under the chair.
Besides simple pressure the eleksen fabrics also can recognize gestures. The fabric sensor has full X, Y and Z axis measurement capability. I saw that in action at the show. ElekTex™ technology is a laminate of fabric layers forming a highly flexible touch sensor that is only 0.6mm thick.

Besides touch sensors, Eleksen also has bend and moisture fabric sensors. I am sure we will soon see many more gadgets that have a fabric casing and fabric based input control.
More details on the Eleksen site.