I started a little stripy bag in shadow knitting back in October, described here. I finished it this week, as a birthday present for a friend who is 11 today. Happy Birthday, Sarah!
I had to make the handles stripy as well, because I was running out of the navy blue yarn, but I like the effect. (It's moss stitch, two rows of each colour.) And I lined it with fabric in a sort of batik print.