The Collaborative International Dictionary of English v.0.48:

Shag \Shag\, a.
   Hairy; shaggy. --Shak.
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The Collaborative International Dictionary of English v.0.48:

Shag \Shag\, v. t. [imp. & p. p. Shagged; p. pr. & vb. n.
   Shagging.]
   To make hairy or shaggy; hence, to make rough.
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         Shag the green zone that bounds the boreal skies. --J.
                                                  Barlow.
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The Collaborative International Dictionary of English v.0.48:

Shag \Shag\, n. [AS. sceacga a bush of hair; akin to Icel. skegg
   the beard, Sw. sk[aum]gg, Dan. skj?g. Cf. Schock of hair.]
   1. Coarse hair or nap; rough, woolly hair.
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            True Witney broadcloth, with its shag unshorn.
                                                  --Gay.
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   2. A kind of cloth having a long, coarse nap.
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   3. (Com.) A kind of prepared tobacco cut fine.
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   4. (Zool.) Any species of cormorant.
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WordNet (r) 3.0 (2006):

shag
    n 1: a strong coarse tobacco that has been shredded
    2: a matted tangle of hair or fiber; "the dog's woolly shag"
    3: a fabric with long coarse nap; "he bought a shag rug"
    4: slang for sexual intercourse [syn: fuck, fucking,
       screw, screwing, ass, nooky, nookie, piece of
       ass, piece of tail, roll in the hay, shag, shtup]
    5: a lively dance step consisting of hopping on each foot in
       turn
    v 1: dance the shag