die Scheide
sheath
A cover for a blade, such as a sword or a knife.
Der Ritter zog sein Schwert aus der ledernen Scheide.
The knight drew his sword from the leather sheath.

sheath / vagina
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sheath
A cover for a blade, such as a sword or a knife.
Der Ritter zog sein Schwert aus der ledernen Scheide.
The knight drew his sword from the leather sheath.

The word 'Scheide' (sheath/vagina) is derived from the verb 'scheiden' (to separate), which means 'trennen' (to separate). In both meanings, the word describes something that forms a dividing line: the cover that separates the blade from the outside world, or an organ that marks a boundary between the body and the outside.
Die beiden Wege scheiden sich hinter dem Hügel.
The two paths separate behind the hill.
The two meanings of 'Scheide' (sheath/vagina) are used in completely different contexts, so confusion almost never occurs. If the topic is weapons such as 'Schwert' (sword) or 'Messer' (knife), it means the cover. In a medical or biological context, it means the vagina.
Der Dolch steckte in einer verzierten Scheide.
The dagger was in an ornate sheath.
When 'Scheide' means the cover for a blade, the typical verbs are 'ziehen' (to draw/take out) and 'stecken' (to put in). You draw a sword 'aus der Scheide' (from the sheath) and put it 'in die Scheide' (into the sheath).
Nach dem Kampf steckte der Krieger sein Schwert zurück in die Scheide.
After the fight, the warrior put his sword back into the sheath.
For the meaning 'Vagina,' 'Scheide' is the medically correct and neutral term. It is used in technical language, in biology class, and in factual conversations about the body.
Bei der gynäkologischen Untersuchung wird auch die Scheide kontrolliert.
During the gynecological examination, the vagina is also checked.
cover / shell
'die Hülle' and 'die Scheide' can both refer to something that encloses or protects an object. 'Hülle' is the more general word. It fits packaging, protective cases, or outer layers of many things. 'Scheide' is much more specific in this meaning: it is the sheath for a blade, for example for a knife or a sword. Learners may confuse the words because a 'Scheide' is a kind of 'Hülle'. But not every 'Hülle' is a 'Scheide'. For a phone, book, or packaging, you say 'Hülle'; for a blade, you say 'Scheide'.

Der Koch steckte das scharfe Messer vorsichtig in die Scheide.
The cook carefully put the sharp knife into the sheath.
Ich habe eine neue Hülle für mein Handy gekauft.
I bought a new case for my phone.