Cashmere is made from the under layer of short hair from a goat that's been bred specifically for that hair. The undercoat is soft compared with the coarse top layer of hair that covers it, and people pay a premium to get this wool that has a very downy texture.
Not all cashmere is made equally, however, as anyone who's bought a pashmina scarf knows. Pure cashmere only comes from goats that reside in the mountainous region of Kashmir, India. However, cashmere, which is generally not pure cashmere, is made in several other countries, such as China, Turkey and Iran.