The Collaborative International Dictionary of English v.0.48:

Lugworm \Lug"worm`\, n. [1st lug + worm.] (Zool.)
   A large marine annelid (Arenicola marina) having a row of
   tufted gills along each side of the back. It is found
   burrowing in sandy beaches, both in America and Europe, and
   is used for bait by European fishermen. Called also
   lobworm, and baitworm.
   [1913 Webster]

WordNet (r) 3.0 (2006):

lugworm
    n 1: marine worms having a row of tufted gills along each side
         of the back; often used for fishing bait [syn: lugworm,
         lug, lobworm]