I can't believe I left the shop with only one picture of it.
The yarn company is Made in America Yarns. The yarn is called Florafil Super Soft Cotton. It's a bulky cotton that comes 125 yds/100 g and knits 3.5 sts/4" on size 10 needles. It's 97% cotton, 3% nylon (there's a fine nylon wrap around the cotton roving).
It's amazing. The colors are extraordinary. There are variegated and solid shades. Here's a link to the company's website and color card, but really you have to just come into the shop and see it yourself.
Tamara is using the ball pictured above to make a baby sack. (Cocoon, photo prop, you know what I'm talking about.)
Here's a sweet little 2-skein knitted baby blanket pattern. You should also just check out the Pattern Ideas page on Ravelry.
One pattern that I know would look AMAZING in this yarn is the Groovy Little Baby Blanket.