I can't remember exactly where I heard about Kool-Aid dying, but I used this Knitty article as my main source. I picked out a couple of packets of a pretty Kool-Aid colour, Ice Blue Raspberry Lemonade, and went at it.
Here's the yarn getting a nice bath before its dye-job:
And here it is in my microwave-safe dying dish:
I decided to go with the microwave method because it seemed quickest, but I had to leave it in there for about 5 or 6 rounds of 2-minute zaps with a couple of minutes resting time in between, so it might have been better to just leave it on the stove-top to boil. (Please excuse the messiness of my microwave. It might not have ever been cleaned.)
At the end, all the dye had been absorbed into the yarn... magic!
Here it is drying:
As it was drying it had a beautiful robin's egg blue colour:
That faded a little when it dried, though I'm still quite happy with the colour. If I had wanted a more saturated colour, I should have used 4 packets of Kool-Aid instead of 2. The article suggests 1 packet per ounce of yarn, and I had about 3.5 oz (or 100g). Anyway, here it is all skeined up next to the yarn I plan on using it with for the next project I'll knit, which will be this booby sweater: