Most questions of "new cases" within the laws of Shabbos, are best approached by looking at the source reason behind the prohibited melachah; and then continuing into the reasons and/or framework we know of, for any Rabbinical fence.
Two of (of the 39) the works prohibited on Shabbos are writing, and erasing.
In the Mishkan, writing was performed when someone made a numerical marking on each of the boards that formed the Mishkan's walls (so they could be reassembled with the same boards reconnected in the same order as before). (see Gemara Shabbos 31b with Rashi) OR writing was performed by the accountant recording written calculations in a book concerning the inventory of gold and silver etc. in the Temple treasury.(see commentary of Avnei Nezer to Shulchan Aruch O.C. 199:10) Erasing was needed when someone would have written a mistaken symbol and you needed to erase it with intent to rewrite the true value in its place.(see again Gemara Shabbos 31b with Rashi)
Either way the work prohibited on Shabbos would be the actual creation of the letters and words; and the erasing (actual destruction) of those same letters or words.
The OP's case is that of the embroidered words on the collar of a talis which have been fully written before Shabbos began. Folding the talis neither creates nor erases any wording. The words are still there exactly as before, just wrinkled or folded partially. Although the onlooker may now see visually a different message, or none at all etc., this does not matter. This is because the actual symbols have not been changed in any way. No writing or erasing has taken place at all!
This can easily be seen by the fact that poskim debate the law concerning a book with "public library" stamped on the edge of the pages. We see that the debate (about permitting the opening and closing of this book) is only if the written words will be destroyed by actual separation or recombined by actual reassembly of the individual edges of each page. However, poskim do not debate or question if you may open a notebook or book without writing on its edge for fear that you will "reveal" or "hide" sentences or letters while flipping pages! No one has a question on this at all!
One reason that some poskim allow opening and closing a book with stamped writing on the edges of the pages, is due to the comments of the Rema in his teshuvos (119) dealing with this case in S.A. O.C. 340. He writes that since the book is made to be used like this, so that it is constantly meant to be opened and closed, it cannot be considered writing or erasing at all. This is similar to our Halachah which permits opening and closing a door on Shabbos even though every time you open or close the door, you are in essence destroying and building a section of wall. It is permitted because the door was built for that usable function and therefore it is not the "work" of building or destroying. So folding a talis would certainly be considered its functionality.
Furthermore, R' Moshe Feinstien Z'tzl, allows one to take two separated, and torn halves of a written page, and match them up back together again on Shabbos. This is because the ripped print is usually recognizable and readable without putting them back together. Putting it back merely enhances the reading experience. However, he does say that if you know for certain that some letters are cut in half to a point where individual letters are not recognizable, then one should not put them back. However, one need not suspect this to be the case and may assume the split letters would be readable without checking first. (see Igros Moshe Y.D. 2:75) (also see Gemara Shabbos 104b, "Amar R' Ami...")
If so, then a talis, which has no split letters (merely whole letters folded or concealed) should certainly be OK.
I hope this helps. :-)