Marissa from Rae Gun Ramblings guest blogs at Brassy Apple with a tutorial showing how she gathers fabric. Instead of running basting stitches across the top, she uses a zig zag stitch to couch a thin cord to the fabric. The zig zag stitches create a casing of sorts, so you can pull the thread to gather the fabric. Get the tutorial.
[photo from Rae Gun Ramblings on Brassy Apple]