Cowhides are dropped by cows when they are killed. If it is brought to a tanner, it can be turned into soft leather for 1 coin or hard leather for 3 coins. Tanners can be found in Al Kharid, the Ranging Guild, Canifis and the Crafting Guild. Soft and hard leathers can then be crafted into various pieces of equipment through the Crafting skill.
It is also used alongside a unicorn horn to generate a unicow in the Tower of Life.
Good places to gather cowhides are the pastures in Lumbridge and south of Falador, though the Falador pastures are closer to a bank.