The Collaborative International Dictionary of English v.0.48:

Saxony \Sax"o*ny\, n. [So named after the kingdom of Saxony,
   reputed to produce fine wool.]
   1. A kind of glossy woolen cloth formerly much used.
      [Webster 1913 Suppl.]

   2. Saxony yarn, or flannel made of it or similar yarn.
      [Webster 1913 Suppl.]

WordNet (r) 3.0 (2006):

Saxony
    n 1: an area in Germany around the upper Elbe river; the
         original home of the Saxons [syn: Saxony, Sachsen,
         Saxe]