From the Super Mario Wiki
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The Yoshi Hut is a building on Craft Island in Yoshi's Woolly World. It resembles a pincushion and its function is to select a Yoshi design easily. When the player enters, a menu will appear where the player will be able to swap their Yoshi designs. Additionally, the player can save a design to a Yarn Yoshi amiibo. Another similar hut, the amiibo Hut, contains designs that can be unlocked by scanning compatible amiibo.
"At this happy hut, you can switch Yoshis or save a design/color combo to a Yarn Yoshi amiibo!"