State in which a priest entertains a bishop (7)
I believe the answer is:
alabama
'state' is the definition.
(Alabama is an example)
'a priest entertains a bishop' is the wordplay.
'priest' becomes 'lama' (lama is a kind of priest**).
'entertains' is an insertion indicator.
'bishop' becomes 'b' (abbreviation used in chess).
'a'+'b'='ab'
'lama' enclosing 'ab' is 'labama'.
'a'+'labama'='ALABAMA'
'in which' is the link.
(Other definitions for alabama that I've seen before include "where cotton can be produced" , "17th US state, joined 1819" , "US state west of Georgia" , "SE US state" , "US state known as the Heart of Dixie" .)