My personal preference:
I like Buddha Bunz wool wash. Turn your woolies inside out, that way if you overlanolize, the lanolin spots won't show up when your child wears the wool. First I rinse the wool by filling the bathroom sink with cool water and gently squishing the wool in the water. I put about a nickle size blob of wool wash in the bottom of a large bowl. I add just enough warm water to cover the bottom of the bowl. Then I swish the water to create a small lather. Next I fill the bowl with cool water. I put the woolie in the bowl and squish it around until I feel that it's clean. Then I let it soak for about 30 min. I pour the wash water and wool into the washing machine and use the spin cycle to remove the excess water (take care to ensure that your washing machine is set to no hot water or agitation). Then I lay the wool over a collapsible drying rack. It usually takes about 24 hours to dry. I like Buddha Bunz wool wash because it has enough lanolin in it that I don't have to lanolize. Melinda also offers a lanolin spray if you need just a little lanolin boost between washings. http://hyenacart.com/prod_details.php?id=54056&vid=1379
Baby shampoo and lansinoh method:
Always use room temperature water when washing and rinsing wool. Be gentle with them as you hand wash, too much friction and heat on the fibers will cause them to felt. Turn the wool inside out before washing. Rinse the wool by hand in cool water. Add wool wash or baby shampoo to new room temperature water. Squish and squeeze water into the wool instead of rubbing. Rinse the wool with cool water if you are using baby shampoo. Roll them in a towel to absorb excess moisture and lay flat to air dry. Wool does not need to be washed after every use, only when it smells dirty. You can spot clean with a wool wash bar. When the wool begins to loose its waterproof quality it will need to be lanolized. After the washing process, take a small Tupperware container. Fill it half way with hot water. Put in a tiny amount of wool wash or baby soap and about ½ inch of lanolin (I use the breast cream). Put the lid on the Tupperware and shake until the lanolin has dissolved. Pour this into your sink. Add warm water gradually turning to cold water until the water feels cool. Put the wool into this water and allow it to soak for 10-15 min. Rinse the wool with lukewarm water when soak is over. Lay flat to dry.