Kind of pencil, round and silver, that's used by a woman (7)
I believe the answer is:
handbag
'used by a woman' is the definition.
I can't tell whether this defines the answer.
'kind of pencil round and silver' is the wordplay.
'kind of pencil' becomes 'hb' (I am not sure about this - if you are sure you should give a lot more credence to this answer).
'round' means one lot of letters goes inside another.
'silver' becomes 'ag' (Ag is the chemical symbol for silver).
'hb' placed around 'and' is 'handb'.
'handb'+'ag'='HANDBAG'
'that's' acts as a link.
Can you help me to learn more?
(Other definitions for handbag that I've seen before include "Purse (in the American sense)" , "Woman's accessory" , "Woman's carrier" , "'A ---?', famous Lady Bracknell line (Wilde)" , "'A - - ?' (Lady 13 dn)" .)