Much like he daughter Rosie, Lily adds her stats to that of another hobbit. One key difference is that Rosie targets hobbit heroes while Lily targets hobbit allies. Rosie Cotton is designed to beef up the stats of the hobbit heroes. Lily Cotton, on the other hand, is designed to get a hobbit ally back into your hand.
She is designed to work well with her husband and son. She gets a hobbit ally a ready and increased stats for a phase, and then sends the ally back to your hand. Of course, you have to repay for that ally if you want to use it again. On the plus side though, this removes any damage (and condition attachments) on that ally, gives the (hobbit) ally a +2 (if Tom Cotton is in play), and activates any "when played" effects on that ally. Any hobbit ally is a great target due to him, but standouts include Bilbo Baggins (for a pipe), Bob (for a mount or Bill the Pony), Cautious Halfling (for a card/scry), Farmer Maggot (for direct damage), Halfast Gamgee (for a resource/resource smoothing), Keen-eyed Took (for some deck tech), Merry (for some easy ), Odo Proudfoot (for another hobbit ally), and Young Tom (for the +5 engagement cost per enemy). We can increase Lily's stats as well for beefed up allies with cards such as Wild Stallion.
This can be used for many situations. In need of some extra attack or lack a character for defending? Lily readies one and gives it more oomph. Surprise encounter card requiring a character to be available (assuming you don't want to use Lily for that task)? She has your back.
Additional note: Can be used with There and Back Again to put a copy of that ally into play from your and or discard pile for cheap. One example could be to use #Lily to ready #farmer maggot for an attack. He then is sent back to your hand which allows you to play There and Back Again to return Farmer Maggot into play for 1 resource, dealing a damage (or two) to an engaged enemy. Savings of 2 resources! All because Lily Cotton allowed the ally to be returned to your hand.