The Sailcloth is a piece of hand-made fabric given to Link by Zelda. It functions like a parachute, allowing one to greatly slow down while falling through the air.
To use it, press the B button while falling and when the item displayed in the top-right corner automatically switches to the Sailcloth.
If you fall from a great height, the Sailcloth will stop you from taking fall damage. When traveling from the sky to the ground, Link will automatically use the Sailcloth at the last minute, if you don’t use it yourself.