The word pallium is Latin for a traditional Roman cloak made from wool. It is a garment that only the Pope can confer and signifies the jurisdiction of a metropolitan archbishop and also the special communion that the recipient shares with the Pope and the Church of Rome. The earliest reference to the pallium derives from the reign of Pope Marcus (died 336) who conferred the pallium on the bishop of Ostia.
The pallium is still made from lamb's wool. In fact, the lambs come from Trappist monks. The wool is then given to the nuns of the convent of Saint Agnes who weave the wool into the pallia. The connection to sheep also recalls "Christ the Good Shepherd" who carries the wandering sheep upon His shoulders. Similarly, the pallium is a reminder to the archbishop that he too should be a good shepherd ever mindful of the straying sheep.
The pallium has an organic connection with the Eastern Orthodox omophorion and it looks similar to the Pope's pallium. (See pic below.)
Pope Benedict XVI has returned to an ancient form of the pallium, which closely resembles the Orthodox pattern. The papal pallium is wider than the standard pallium. However, he has been seen recently wearing a version closer to the standard design. If any knows the significance of this, please share.