Something that's tufted has or is decorated with wispy clusters, like the tufted feathers on a baby bird's head.
A tuft is a clump or cluster of something soft and flexible, and the word probably comes from the Old French touffe, "tuft of hair." So things that are tufted have or resemble tufts. There may, for example, be tufted grass growing between the bricks on a sidewalk, or soft, tufted fur on your dog's belly.