Cut a carpet-making net to the desired size and shape, using a utility knife or scissors. You can find carpet-making nets at craft and fabric stores.
Color a design or pattern onto the net using permanent markers. If you plan to make a monochrome rug, skip this step.
Cut rags into 5-inch-long strips half as wide as each square in the rug netting, or cut thick pieces of yarn into 5-inch-long strips. The number of strips necessary will vary depending on your specific mesh size and netting area. For best results, cut about 100 strips to start with and cut more as you need them.
Pull a strip through the eye of a latch hook tool and double the fabric over as though you were threading a needle. Thread the fabric through the top of a carpet netting square, around an edge of the square and up through the next square. Use the hook on the latch hook tool to grab the two free ends of the fabric and pull them through the fabric's loop to make a tight knot. If you colored a pattern on the net, use strips of fabric that match the color of their corresponding squares.
Repeat the threading and knotting process until the shag carpet is full. The carpet pile will be about 2 1/4 inches high.