On January 25, 2001 the National Toxicology Program released two years of research on naphthalene. In the study, rats were exposed to naphthalene by inhalation the way we are in doses comparable to those we receive at home and work. The study concluded that in rats, "naphthalene causes cancer, a finding that scientists and regulators must wrestle with to determine if, as commonly used, it presents a risk to humans as well."
Besides naphthalene, mothballs are also made of camphor or paradichlorobenzene. All three are, to varying degrees, toxic to humans. Clothing that has come into contact with these chemicals should be aired out, dry-cleaned, or washed.