Cut your insulation material slightly smaller than your finished potholder. Once you've sewn the front and back of your potholder together, you can stuff the insulation material into the potholder. Push it all the way out to the edges, using the end of a wooden spoon or a knitting needle to tuck the batting into the corners. This reduces bulk along the sides of the potholder, important when you're sewing a heavy fabric, such as denim or canvas. A rotary cutter and mat make cutting the batting to size easier.
Quilting all the layers of the pot holder together keeps the insulation material from sliding around in the pot holder. Sew lines across the pot holder about an inch apart -- sew diamond or a random pattern of swirls. If you pieced together a quilt design for your pot holder, you can sew around the design for your quilting. Any stitching is fine as long as it sews all the layers of your pot holder together.
You can purchase batting made of polyester, cotton or wool. Cotton or wool batting will shrink, which could leave you with a puckered pot holder. Pre-washing cotton batting will offset this. If you use wool batting, make sure it is labeled washable. Pot holders absorb spills and other stains in the kitchen and should be washable. Polyester doesn't shrink in the wash. You can also use old blankets, ironing board covers or heavy felt as insulation for your pot holder.
If you're using thin batting in your pot holder, cut two layers for extra insulation. After you've stuffed the batting into your pot holder, sew up the open side. Add decorative binding around all four edges, and a hanging loop to finish your pot holder. To make a padded pot handle, fold your pot holder in half and sew down one side. The resulting insulated tube will fit over the handle of a cast iron skillet or other pan to insulate your hand from the heat.