A caul is a piece of the fetal membrane that covers the heads of some babies when they are born. This occurrence is relatively rare, and because of this folklore says that a baby born with a caul possesses psychic powers. In the past, people would keep cauls and placed great value upon them as good luck charms.
This page (http://www.ghosts.org/faq/5-11.html) last updated April 13, 2005.