Wool may be used for a number of things, but is not ideal for most dubbing purposes. Mohair, or other fur is invariably better. Of course, wool is available everywhere in a whole host of colours and shades.It will work alright on some flies. See also "tups" some dubbing blends work well with it.
Some dressers used untreated sheeps wool for a number of things, but it is very messy to use, as it contains large amounts of natural oils and fats, and is also invariably absolutely filthy! I prefer to use clean materials. Of course, wool, on the skin, varies very widely in quality. Icelandic Sheep is often sold as saltwater streamer hair, but I found it quite useless for this, it knots up badly in water.
(http://img33.imageshack.us/img33/6484/chadwicks477.jpg) (http://imageshack.us/photo/my-images/33/chadwicks477.jpg/)
The famous darning wool used by Frank Sawyer for his "Grayling Bug". Original cards of this now sell for silly prices. There are plenty of substitutes and most work more or less well. Hare fur blended with a little wool to match this colour which turns a purply/fawn colour when wet also works well.