Above is an example of a reverse appliqué being combined with a distressed look. The football was cut from the red sweatshirt and a navy fleece was then sewn inside the garment. By using a running stitch, the edge is left raw, allowing it to fray with repeated laundering.
In traditional appliqué, a shape cut out of fabric is sewed on top of a garment, and a zig-zag stitch is used to create a border around the design. A reverse appliqué is when a shape is cut out of the garment, and the appliqué fabric is sewn inside the garment so that the pattern or color peeks through the hole in the garment.
When a distressed look is wanted, a running stitch is sewn around the design leaving the edge raw so that it will fray to create the worn look. Otherwise, a zig-zag stitch is sewn over the edge to create a finished look.
Source: Ed Balady