I love this system of "filing" clothes. I do it for my shirts, PJs and jeans. Never thought about doing this for undergarments, but I think I'll start doing it for them, too! Click for a summary of how to fold tons o' stuff!
By folding up your plastic grocery bags they will take up less space allowing you to store more of them. I think this is way too time consuming to do with most of mine since I use them for small trash cans and go through them pretty fast. However I always keep a few folded ones in my Purse, Car, Diaper Bag, Pool and Gym Totes