From: 'St. Peter's Basilica - A Virtual Tour' by Our Sunday Visitor
In fact, the Confession opens under the center of the dome. This underground church at the height of the Constantinian church preserves the tomb of St. Peter, and is really the "heart of the Basilica" as written by Turcio. A double ramp of stairs descends into an exedra closed by a beautiful balustrade and with multi-colored marble walls and floor, based on a design by Maderno and Martino Forabosco.

The center once displayed the statue of Pius VI, kneeling in prayer, one of the last works by Canova, which was not completely finished at his death. Now, it is located inside but in its original position between the two ramps of stairs, as the Pope requested that it be placed close to the Apostle. The area is beautifully illuminated by the eternal flames of 100 lamps, supported by elegant bronze cornucopias by Mattia de' Rossi.

St. Peter's sepulchral chamber is located at the bottom of the exedra, in a niche decorated by a mosaic from the ninth century with "Christ in the middle of the Princes of the Apostles," and closed by a gilded bronze gate flanked on the sides by two metal statues of St. Peter and St. Paul.

The niche is called "dei Palli" (the Stoles niche) because inside there is a bronze urn, donated by Benedict XIV, which contains white stoles embroidered with black crosses and woven with the wool of lambs blessed on St. Agnes' day.

Other Sources
The pallium is a circular band of white wool which the pope places on the shoulders of each archbishop appointed during the past year. It symbolizes the twin responsibilities of shepherding the flock entrusted to him and fostering communion with the vicar of Christ. This takes place each year on June 29, the Feast of Sts. Peter and Paul, to remind each archbishop that he is to be a shepherd in union with Peter and an evangelizer in imitation of Paul.

Each year on Jan. 21, the Feast of St. Agnes, the pope blesses two baby lambs. The Trappists, who oversee a flock of sheep at Tre Fontane, select the two choicest baby lambs from their flock for this purpose. The Feast of St. Agnes has been chosen because Agnes means lamb and the lamb has always been a symbol associated with this Roman virgin and martyr of the fourth century. When the lambs are brought to St. Agnes Church on their way to the pope, one is crowned with white roses to signify her virginity and one with red roses to signify martyrdom.

Every archbishop is challenged not only to a virginal spousal love for the church he serves, but also to be willing to suffer even martyrdom in witness to the faith.

After the lambs are presented to the Holy Father, they are transferred to the sheepfold at Castel Gandolfo, where a Vatican shepherd nurtures them. Approximately a month prior to June 29, the shearers remove their wool coats. Religious sisters then make the palliums for the new archbishops from this wool. Vatican officials insert the newly stitched palliums into a silver-gilt box located in a special alcove in the confessio of St. Peter’s Basilica overnight before the pallium ceremony. They rest here in a niche that is very close to the bones of St. Peter.

On June 29, the Holy Father celebrates the Eucharist with the new archbishops and, after the homily, places a pallium on the shoulders of each one. This expresses the solemn responsibility which each archbishop assumes to shepherd the flock of Christ entrusted to him. Like the shepherd who carries a lamb on his shoulders, the archbishop is to care for the flock entrusted to him with the care of the Good Shepherd.
- Archbishop Alfred C. Hughes of New Orleans

According to the New Catholic Encyclopedia, the pallium’s origin dates back to the fourth century, when it was worn by bishops of the Eastern Rite Churches and the pope to emphasize “the episcopal dignity and pastoral office.”

In the sixth century, the pallium was conferred by the pope on bishops of the Latin Rite church, especially the metropolitans (archbishops), until it gradually became the symbol of the metropolitan office.” By the ninth century all metropolitans would wear it at specific pontifical liturgies.

The pallium is symbolic of the pope’s conferral of authority to the heads of major local churches and his communion with them. It is worn over the archbishop’s chasuble.