This Blender video demonstrates how to apply a cloth texture with holes in the texture. Blender version 2.74 was used for this tutorial. This video shows many techniques that may be helpful to beginners and intermediate users.
Link to previous cloth napkin video
Link to cloth image
00:42 Cloth mesh baked.
01:31 Glossy shader replaced with Diffuse shader.
02:01 Image texture added.
02:47 Cloth mesh unwrapped.
03:50 Math node added to control strength of the displacement.
04:20 Holes added to texture by adding a mix shader, transparent shader, and a math node.
05:50 Cloth material is improved.
07:04 Final image rendered.