This is a *Woven* Heart (Reverse Appliqué?) -- with hand-sewn stitching encasing & surrounding-- for a sweet finishing touch. The Heart is on the Flap of a Hand-Made 'Cosmetic Pouch'. Beautifully done, Great Ideas!
When a “bird’s nest” of thread appears, the likely culprit is your upper thread tension. If loops appear on the underside of the fabric, the upper thread tension may be too loose. If knots appear on top of the fabric, the upper tension may be too tight.