Elise may be able to better describe what it going on with Peter's blanket, but I feel a need to share my latest findings.
I've been noticing these tiny fuzz balls littered about our apartment. I had no idea what they were. They were scattered in approximately the same pattern and in approximately the same number and size as tiny cloth rabbit droppings. I found a pile next to Pete's bed, as though that's where the cloth bunnies lair remained hidden.
Pete has two blankets. They are identical in nearly every respect. One is his old everyday blanket that he sleeps with at night. The other is his back-up blanket (should he ever lose his primary blanket). It also serves as his pillow blanket. We lay it over his pillow at night, and it served as the one constant when he lay his head down at night as he moved from bed to bed during our many moves after leaving Brazil.
The pillow blanket is nearly pristine. The other....well....let's just say it has seen better days. Now, it is nearly in ribbons, and when I saw Peter tearing thin strands from it and wading them up into little balls, I finally understood what the little white mothball-looking things littering the carpet of our apartment.
Elise has dubbed them blanket boogies, and I expect to see a lot more of them before Peter completely tears his blanket to shreds.
Good thing he has a back-up.