The material has sizing in it. Washing removes the sizing and makes the cloth softer and nicer to handle. If it's still stiff after washing, the material usually has something other than cotton in it. I've had fabric lose a lot of thickness, and I've had it lose very little. Depends on the make or brand, I guess. Different weaves will lose more or less, as well. Every material that remained hard or stiff, failed the bic test.
Washing doesn't loosen it up, unless you mean making it softer.