Wool is a decorational block added in Pre-Release. It is not very difficult to find and is considered renewable, as it can be obtained by shearing or killing Sheep. The player can obtain colored Wool by killing or shearing a dyed Sheep (some sheep may also spawn in colors naturally) or by crafting Dyes with White Wool in a Crafting Table.
The main method of obtaining Wool is by either by killing or shearing Sheep. Wool can also be crafted out of 4 pieces of String, which can be obtained by killing Spiders and shearing Cobwebs.
Light Blue Wool
Light Gray Wool
Some Sheep have natural colors of Wool: brown, white, gray, light gray, black, and pink. Pink is very rare, however.
Wool is mainly used for decoration. This is because it can be dyed a wide variety of colors. Wool can also be used to make Beds and carpets.