The Collaborative International Dictionary of English v.0.48:

Sheepskin \Sheep"skin`\, n.
   1. The skin of a sheep; or, leather prepared from it.
      [1913 Webster]

   2. A diploma; -- so called because usually written or printed
      on parchment prepared from the skin of the sheep. [College
      Cant]
      [1913 Webster]

WordNet (r) 3.0 (2006):

sheepskin
    n 1: tanned skin of a sheep with the fleece left on; used for
         clothing [syn: sheepskin, fleece]
    2: skin of a sheep or goat prepared for writing on [syn:
       parchment, sheepskin, lambskin]
    3: a document certifying the successful completion of a course
       of study [syn: diploma, sheepskin]