Yarn used in ornamental embroidery (4)
I believe the answer is:
tale
'yarn' is the definition.
('tale' can be a synonym of 'yarn')
'in ornamental embroidery' is the wordplay.
'in' indicates a hidden word.
'TALE' can be found hidden inside 'ornamental embroidery'.
'used' acts as a link.
(Other definitions for tale that I've seen before include "Old wives' recital?" , "Narrative - fabrication" , "Fable" , "Yarn or story" , "Anecdotal narrative" .)