Wool In Britain at least, wool production is just a byproduct of the meat industry, as British wool doesn't command a high enough price to make it worth keeping sheep for their fleece alone. The sheep have to be sheared because the fleece gets so heavy and thick, they would suffer from heat-stroke during the summer if it were left on. However, this isn't a natural condition. Wild species of sheep survive without shearing. Through generations of selective breeding humans have changed the characteristics of the fleece to suit themselves, not the sheep.
British wool tends to be used for coarse fabrics like carpets.
The fine wool needed for good sweaters etc comes from Merino sheep, a breed that originated in Spain but which is now kept in vast numbers in Australia. Felt Felt is a material produced by a process that mats and hardens the fibres. Felt is usually made from wool, but it can be made from fur. You should be careful buying a felt hat as it may be either. Rabbit skin is often the source of fur for felt hats.