The Collaborative International Dictionary of English v.0.48:

Sham \Sham\ (sh[a^]m), n. [Originally the same word as shame,
   hence, a disgrace, a trick. See Shame, n.]
   1. That which deceives expectation; any trick, fraud, or
      device that deludes and disappoints; a make-believe;
      delusion; imposture; humbug. "A mere sham." --Bp.
      Stillingfleet.
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            Believe who will the solemn sham, not I. --Addison.
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   2. A false front, or removable ornamental covering.
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   Pillow sham, a covering to be laid on a pillow.
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The Collaborative International Dictionary of English v.0.48:

Pillow \Pil"low\, n. [OE. pilwe, AS. pyle, fr. L. pilvinus.]
   1. Anything used to support the head of a person when
      reposing; especially, a sack or case filled with feathers,
      down, hair, or other soft material.
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            [Resty sloth] finds the down pillow hard. --Shak.
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   2. (Mach.) A piece of metal or wood, forming a support to
      equalize pressure; a brass; a pillow block. [R.]
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   3. (Naut.) A block under the inner end of a bowsprit.
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   4. A kind of plain, coarse fustian.
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   Lace pillow, a cushion used in making hand-wrought lace.

   Pillow bier [OE. pilwebere; cf. LG. b["u]re a pillowcase],
      a pillowcase; pillow slip. [Obs.] --Chaucer.

   Pillow block (Mach.), a block, or standard, for supporting
      a journal, as of a shaft. It is usually bolted to the
      frame or foundation of a machine, and is often furnished
      with journal boxes, and a movable cover, or cap, for
      tightening the bearings by means of bolts; -- called also
      pillar block, or plumber block.

   Pillow lace, handmade lace wrought with bobbins upon a lace
      pillow.

   Pillow of a plow, a crosspiece of wood which serves to
      raise or lower the beam.

   Pillow sham, an ornamental covering laid over a pillow when
      not in use.

   Pillow slip, a pillowcase.
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WordNet (r) 3.0 (2006):

pillow sham
    n 1: bed linen consisting of a decorative cover for a pillow