1) Tie-Dye the shirt and cut pieces of it into long strips. Sew a piece of the fabric around a regular "ouchless" hair tie to make a cool hair scrunchie.
2) Similarly, cutting the t-shirt into thicker strips will give you a tie-dyed hair bandana. No sewing involved--just tie the ends.
Not everyone's into brightly colored tie-dyed items, so here are other things you can do (sans tie-dye)
4) Cut the shirt into large squares and use them as cleaning rags or mini blankets/ bedding for small house pets
5) Braid thick strips of the tshirt together, tie both ends, and you now have a rope-like chew toy for the dog.
That's all I have so far. Feel free to comment and add more!