Cloth is dropped by most humanoids throughout World Of Warcraft. The level of cloth is based upon the level of what you are killing. The first cloth level is linen cloth , then wool cloth, then silk cloth, then mageweave cloth, then runecloth and finally netherweave. You do not have to be a tailor or first aider to have cloth drop. Although many people vendor this cloth, it is best to hold onto it, either to level your first aid or to sell on the auction house. You can also put it on a bank alt in case you ever do need to level tailoring.
Cloth is used by tailors to make bags and clothes. It is also used in first aid to make bandages, a skill which everyone should level up to its maximum.