I am sure you will get some really interesting replies from people who know much more that me. From experience it depends on what material you are sewing on - how dense the design is and most importantly what stabilizer (and how many layers) you are using. Hope I have helped a little. Sarah.

my experience has been if the fabric in the hoop is pulled too tight it will pucker. also in some cases put a sheet of wss on top will help prevent some puckering.

99.99% of the time it is improperly stabilized when it puckers around the edge.
Click on the stabilizer guide below. ;)

I know many will disagree, but I have found hooping stabilizer, but not the fabric, gives me a better stitchout. Most fabrics have a certain amount of stretch, especially t-shirts, so any tugging on them will usually lead to distortion of the stitchout with puckering around the design. A piece of fusible ironed to the back of the area to be stitched is a must on stretchy fabrics. I gently spray this piece with K2000 and align onto the hooped stablizer, placing wws on top of the fabric. A really dense design needs a good cutaway stabilizer.

I've found that cutaway stabilizer is better than tearaway for denser designs. It's the cutaway that stabilizes those edge stitches, gives them something to cling to. If you tear away up to the very edges of the stitching, that causes the stitches to pull tighter together, because they have nothing to hold on to on the edge, and pulls both the stitch and the material toward the center, causing puckering of the material. Tell us exactly what kind of material and design you're using, and what kind of stabilizer, maybe we can be of more help. Hugs, Marji

It's like doing a little dance between the fabric, stabilizer, design, thread, tension, machine, and the sewing witch. I think it takes some experience trying different things over time before you know which dance you are doing and the steps of that dance and hoping the sewing witch is sleeping. If you search around, there are many suggestions about how to solve this problem, but in the end, you have to find which one works for you. The suggestions given below are great and I use all of them depending on what I'm doing. One thing I always have to do is reduce the top thread tension on my machine a little.

Dense design threads can take up space in your fabric causing your fabric to "shrink" a little in that area causing puckers. A good stabilizer can solve that problem, but can be too stiff for your project. What I sometimes do is enlarge the design by 5% without allowing adjustment of stitch density in your software. This will reduce the density a little and you won't notice any change in the design.