I noticed the other day that a t-shirt I've had since shortly before I had started college was wearing out at the neckline. Yesterday, I noticed that another one was wearing out near the shoulder. As I have a pretty extensive wardrobe without holding onto these, I will be taking them to the thrift store where I volunteer for them to be recycled.
As a rule, clothing that is in bad shape, out of season, or otherwise can't be sold, is sent put in a bag for recycling. It used to be the local recycling center that would pick up our recycling. However, we got an offer from a recycling center in Kansas City where we would get paid for what they picked up from us. Thus, according to our manager, we can afford to be a little more selective about what gets put up for sale. I used to simply throw away worn out clothing, but since our store would be getting money for it regardless, I might as well donate to the recycling pile. (And I'm not the only one who has done that, either.)