Cowhides are dropped by cows when they are killed. If it is brought to a tanner, it can be turned into soft leather for 1 coin or hard leather for 3 coins. Tanners can be found in Al Kharid, the Ranging Guild, Canifis, and the Crafting Guild. Soft and hard leathers can then be crafted into various pieces of equipment through the Crafting skill.
It is also used alongside a unicorn horn to generate a unicow in the Tower of Life.
Good places to gather cowhides are the pastures in Lumbridge, north of Ardougne market, and south of Falador, though the Falador pastures are closer to a bank.
If a player has completed the Hard tier of the Falador Diary or is level 99 in Crafting, then they can access the bank chest in the Crafting Guild, which is quite close to a field of cows. Note that access to the guild requires a brown apron, golden apron, or a Crafting cape.
For an exhaustive list of all known sources for this item, see here