Dragon scales. Some say that dragon's skin is leathery, others say it is a much like a snakes. I know it is a bit of both. The scales are real scales, but they differ in size. The largest, along the back, can lift up to allow air in to keep the dragon cool. The smaller ones can do the same, but they are not only smaller, but thinner, and can snap quite easily.
One of the wisest of all dragons, Ancient Birkwood lost an ear in a battle with a knight in shining armor, a dragon slayer no less. There were quite a few scales on that ear, some big, some small. The dragon slayer was a member of the Gatekeepers of Shadows, and he created talismans out of the scales. This was a bad thing, because any part of a dragon, any little bit or piece has great magic. So now the bad dudes have something of value from the dragons. The only good thing is that they are not the smartest earthlings on the planet, so they have yet to figure out all the magic the scales can do.
You can read more about these dragons in the Book Tab on cindyrwilliams.com. Thundertail is the book, and you will see it out and about in the near future.