This technique yields a fitted sheet that will lie flat in the linen closet. (Instructions are for a right-handed person; reverse them if you're left-handed.)
With the sheet inside out, place one hand in each of two adjacent corners.
Bring your right hand to your left, and fold the corner on your right hand over the one in your left, so the corner on top is right side out. Next, reach down and pick up the corner that is adjacent to the one that was in your right hand (it will be hanging in front), and fold it over the other two corners; this third corner will be inside out.
Bring the last corner up, and fold it over the others so it is right-side out.
Lay the sheet on a flat surface, and shape as shown. Fold two edges in, so all the elastic is hidden.
Fold the strip of fabric into a rectangle. Continue folding until the rectangle is the size you want.