The binding is finished by hand with a slip stitch. I used to dread this part, I thought it was pointless and boring. Why not just sew it on with a machine? Well let me tell you, it looks way way better if you do it by hand! Also once I relaxed and realized that I didn't need to rush, I actually enjoyed making slow progress one lovely hand-stitch at a time. I reminded myself that this wasn't a race, it's about making something beautiful.
I want to put a little disclaimer here: I'm not sure if the way I start and end each row of slip stitch is correct but it works for me. I would love to hear how other more experienced quilters do this!
With that said, tie a knot at the end of an 18-inch length of thread. Hide the knot by putting the needle through the inside layer of the folded binding and come out right at the fold to start the slip stitch. The little knot gets hidden behind the binding.
The slip stitch is an almost invisible way to tack something on.
Take a tiny horizontal stitch (just a few threads) from right to left, just above the sewing machine seam on the O-wool as pictured in the first photo above.
Then you put your needle into the hole you came out of on the top fold of the binding. Slip your needle through about 1/4-inch of the fold of the binding fabric and pull your needle out of the top.
Repeat all around the blanket.
When you get to the corners give them a few extra stitches to tack the mitered fold down.
To hide your thread ends follow the pictures above.
Take a few tiny stitches into the same place.
Then tie a little knot around these stitches and pull your needle through the binding towards the edge of the blanket.
Pull it taught and snip it off. It should disappear.
Continue slip stitching and tacking down the corners all the way around the blanket and you'll be done!