Using a row of eyelets is a great way to make a ruffle. Thread a ribbon or cord through the eyelets, and adjust to gather as little or as much as you like. One of my favorite methods for ruffling, because it gives me an excuse to add ribbons to knitting.
You can use a simple row of eyelets, spaced close together for a gathered look, or farther apart for a looser effect.
Here is an example of an eyelet row, edged on top and bottom by a purl row.
Worked over an odd number of stitches
Row 1 (right side) Purl
Row 2 *K2tog, yo; repeat from *, ending with k1
Row 3 Purl