Yeah, it's the compression. Fibreglass is the same way - compress out the air, no insulative value. In both cases, it's about the trapped air space. A rectangular balloon is R-1, more or less; each additional air layer is another R-value, again, ish, and in both cases, assuming no other insulative value in the materials, which, of course, is inaccurate.

And, absolutely, enclosed. The good things about big rectangles are that sleeves are easy to make and cheap fabric is all you need. And I have a sewing machine! Everybody wins. :D