Hooking with yarn is very similar to hooking with fabric strips. I use the same hook, the same backings, even the same frames. I even work on the finished side of the rug, which I prefer to the punch-hook style of rug hooking. But the aspect of hooking with yarn that I like best is the ability to create beautiful lettering.

Celtic Love Knot, designed and hooked by Judy Taylor, Auburn, Washington, 2008.
If you are just starting out with inscribed rugs, think big letters. The smaller you go, the harder it is to keep everything legible. Block letters are easier, but take up a lot of space. Cursive writing is the most difficult to hook.
Keep in mind that yarn is malleable. The way you fill in around the letters will help correct the shaping.
To read this complete article, please see the January/February 2010 issue of Rug Hooking Magazine.