Most clothes are colored before they exist. The yarn is dyed before it is knitted, or the fabric is dyed by the roll, and only then is it cut and sewn. Garment dyeing turns that around: the piece is cut and sewn from undyed fabric, and the finished garment goes into the dye bath.
What it does to the size
Hot water and movement let plant fibers like cotton and linen relax and shrink. In garment dyeing that happens in the dye bath, before the piece is sold, so the pattern is cut a little larger and shrinks to its finished size. The size on the label is the size after shrinking, and there is less left to shrink in your own wash. Less is not none: follow the care label.
What it does to the feel
A dye bath is a long, warm wash. The garment comes out already softened, where a piece-dyed tee often takes a few washes to get there.
What it does to the seams
Everything in the bath takes the dye, the thread included, if it is cotton or wrapped in cotton. Polyester does not take the dyes used on cotton, so a seam sewn with it stays a shade lighter. Coats, the thread maker, advises that thread for garments dyed after sewing should be the same fiber as the fabric.
Why makers do it
A maker can hold one undyed stock and dye it into colors as orders come in, instead of guessing colors months ahead. Coats puts it as reacting much closer to actual demand, with less finished stock sitting on shelves. It costs more per piece than dyeing fabric by the roll, and dye houses set a minimum for each color.
Garment dyed here: Hemp Tee — Black.