Hmmmm. You can get simple fabric-style folds using these tutorials:
http://www.heathrowe.com/tuts/curtain.asp
http://dawnofdesign.info/dod_tut_stn.htm
...But the effect is quite linear and does not have the full thickness folds like proper fabric. The ideal solution is to model it all in a 3D application, but that's quite an undertaking. If you are looking for a simple T-shirt logo-on-tshirt effect, though, you may as well just take a high resolution photograph and use
Displacement Maps. Depends what you are looking for really...
