A tassel is an ornament or decoration that's made of threads. Tassels are used to decorate curtains, pillows, and clothing.
A graduation cap (or mortarboard) often has a cord with a tassel attached to the top with a cord—in the U.S. it's traditional for a student to move the tassel from one side to the other at the end of the graduation ceremony. You'll also see tassels along the edges of fancy drapery and other soft furnishings. Tassels in various parts of the ancient Arab world were considered good luck, said to protect children from evil spirits.