On a low setting. A few times I have noticed it, I don't use my dryer very often, but yesterday had to dry some school clothes for the DSes and 2 new polo shirts, one age 9/10 the other 12/13 both shrank a lot, and they were only in for 10 minutes on low!
I've also noticed it with washing, all their clothes now have a 30 degree wash temp on them, however, when a pair of school trousers got washed with some other things on a 40, they shrank.
i ahd thought the 30 degre thing was to encourage people to wash at lower temps for the enviornemnt issue