I wish I could say I thought of this technique on my own, but I got the idea from a shower curtain I have that is all white, and has this same mock-smocking design. I thought it would be interesting to use the same technique for a garment, but use striped fabric instead, to accentuate the interesting shapes made when the pleats open and close on themselves.
I made a simple top, but you could use this same technique for lots of other things. Since I just made mine based on measurements of my daughter, I'll give you the basic steps and you can adapt it to suit your needs.
Start by squaring off your fabric. I try to do this whenever I sew, but it will be especially important in this project. This is easily done by ripping across the fabric at the top to get a nice straight edge that you know will be perpendicular to the selvage.
(For reference, I used a 40" x 20" rectangular piece of this Kaffe Fassett Stripe fabric to start with)
Next, mark lines with a disappearing fabric pen at 1/2", 3", 5 1/2", and 8" from the top of your fabric as shown above. I didn't do this, so you can trust me when I tell you that it will make things much easier.
You can make as many pleats as you want but I made 4. Just make sure you do an even number for this technique to work. Pinch the fabric together, aligning the lines carefully as shown above and below. It may help to press them if you are having difficulty getting things to line up properly.
Pin the pleats in place down to the 8" mark.
Stitch each pleat together carefully, using the stripe line as a guide, until you reach the 8" mark. Back-stitch at the end.
Figure out where your side line will be (this top only has a seam on one side), as well as your back center, and repeat the whole process for the back.
Now, fold pleats 1&2 together and 3&4 together as shown and stitch in place at the 1/2" mark.
Next, open the pleats in the opposite direction and pin and stitch at the 3" mark.
Now bring the pleats back together and pin and stitch in place at the 5 1/2 inch mark.
And then open them up again and pin and stitch in place at the 8" mark.
Press the pleats flat if you want to give them a rounder neater look.
Repeat the process on the back pleats as well.
Use a shirt that fits as a guide, or just eye-ball the curves for the arm openings and cut them so they are the same on both sides.
Then I folded under and sewed my side seams, added buttons and button holes, finished the neck and arms with self-made bias tape, and hammed the bottom.