Although the fabric takes its name from the French and its resemblance, when touched, to a caterpillar, its early production is more closely linked to Scotland, and the weaving of Paisley shawls. The production involved weaving tufts of coloured wool into a blanket, cutting them into strips, and then treating them with heated rollers to give the fabric its familiar fuzzy nap.

Before long, the fabric was also used to make carpets, particularly imitation Oriental rugs, and the automation of the process made this quicker and easier.

In the 20s and 30s, production began in the USA, and it was then that the term "Chenille" became widespread. North Georgia was the centre of the industry, and many businesses even managed to weather the depression.

Interestingly, it still wasn't widely used for clothing until the 1970s, when the soft feel and bright colours fitted in well with the fashions of the time, and the dawn of the huge interest in crafting, quilting and the like saw its popularity surge again in the 1990s, continuing to the present day.

More Info: en.wikipedia.org