During the American Civil War, Northern forces quickly gained the upper hand in naval battles, with a strong fleet of timberclad, tinclad, and ironclad warships. The Confederacy experimented with armored ships, and did construct a handful of ironclads, but did not have the industrial base to build a navy, and were thwarted in attempts to buy warships overseas by the European and Russian powers that supported the Union, and who would confiscate any ships built for the Confederacy.
Confederate Commander John B. Magruder came up with a clever and cost-effective solution, the cottonclad. The cottonclad was a steamship -- any suitable steamship they could get their hands on --
that was stripped down to the main deck to allow a superstructure of cotton bales to be built on it. This had the advantage of being cheap, light, and effective. While the Union ships could out-range the Confederacy ships, the thick cotton padding let them charge the ironclads and survive the barrage until they were close enough to fire back, board, and often, ram the Union ship. And if worse came to worst, the cotton could be easily jettisoned, allowing for top speeds during retreats.
There were downsides, of course. Cotton is flammable, and some ships survived the impact of enemy fire only to burst into flames. The cottonclads were, in a sense, disposable ships, thoroughly outclassed in battle. The cotton bales were there to protect the marines from enemy shelling, but the majority of the ships' armory consisted of sharpshooters hidden behind the bales, and the two main modes of attack were to get close enough to board the Union ships over hastily dropped gangplanks or to ram them with a long ram hidden beneath the waterline.
One benefit of a cottonclad warship was that it looked quite a bit like any other ship carrying bales of cotton. The ship was loaded with five-hundred-pound cotton bales stacked three deep all around the sides, with a hidden 'courtyard' in the center. As these bales were going into battle, they were held to the deck of the ship with iron straps, with additional bales behind the wall serving as platforms for the sharpshooters. Additionally, large vertical wooden beams could be added to provide a palisade behind the bales to protect sharpshooters.
The emphasis on sharpshooters is not coincidental. Due to lack of large guns and ammo, cottonclads were often more troop transports than warships, counting on the cotton to absorb enemy fire until their smaller guns came in range, and only the fusillade of a hundred men providing rifle fire -- effective only at about 370 meters -- was enough to cause the Union soldiers any major concern. Once in range, however, this barrage could be quite effective. Ramming was also more effective than you might at first imagine, as while an ironclad was not especially likely to be breached and sink when rammed, these were primarily river battles, and Union ships could be run aground; likewise, while the hull might not be breached, disabling a paddle wheel could cause significant damage to an ironside's maneuverability and battle-readiness.
Cottonclads did some damage in the war, most famously in helping win the Battle of Galveston, capturing and burning the Union warships, perhaps largely through surprise. Cottonclads were used sporadically and as needed by the South throughout the war, but by the end of the war there were no surviving cottonclads.
But wait, there's more!
No discussion of the cottonclads would be complete without mention of the General M. Jeff Thompson, usually called the Jeff Thompson for short. This was one of the early attempts as a cottonclad, and was actually properly 'clad'. Captain J. E. Montgomery, in 1862, sheathed her hull in 4 inches of stout oak, 1 full inch of iron on her bow, and fitted her with bulkheads comprised of compressed cotton bales between pine sheeting.
Amusingly, her first trip was to Fort Pillow. Less amusingly, she caught fire and was abandoned less than a year after being fitted out with her fancy new armor, in the Battle of Memphis. The Confederacy, not having the time or funds for experimenting with cotton/ironclad hybrids, appears to have given up on this concept, preferring the cost-effectiveness of driving mountains of cotton into battle.