There are lots of things you can put in your nesting bag. A few easy things for sewers/quilters are dryer lint (from washing your quilts and fabric), yarn, twine, and string, all of your bits of thread, and of course thin small strips of fabric. You can also add things like hair, cotton balls, leaves and shredded paper. If you add scraps of fabric, make sure that you cut them into very thin strips (like 1/8" or so) and about no more than 6" in length.
For your nesting bag, you can upcycle a used onion bag.
Simply tie a knot at one end.
Grab a little helper.
And fill up the bag.
Tie a knot at the other end and put a piece of kitchen twine through the knot to hang it.