Today, the AAP (and other bodies of "authority") advise against placing a sheepskin in baby's sleeping area. It is feared that it can increase the risk of SIDS. The fluffy nature of sheepskin may lead to suffocation. I am not sure if covering the sheepskin with a fitted sheet would reduce this risk. Maybe other mommas can help...
Now, this is not to say that a sheepskin is not a great addition to your baby's essentials. It is great for helping to regulate your little one's body temp, during both cool and warm weather. Plus, it is just a super cozy surface for your LO to spend time on! You could use it in a variety of applications:
*Placed in a moses basket (or on the couch!), it would be great for naps (this way, you can always keep an eye on your babe)
*Use it as a massage mat
*It is perfect for floor time. Your baby will be able to hang out on a super comfy surface.
*Plus, you could lay it in a jogging stroller. It would be perfect in helping keep your little one comfortable on long walks or runs.
A lot of NICUs use sheepskins because of their many benefits, too.