Novelty yarn and and types of novelty yarn is one kind of fancy yarn. We produce it in textile yarn manufacturing. The use of it is for decorative purpose. Now we use novelty yarns in the art of fashion and designing textiles.
Here is the types of novelty yarn in textile spinning discussed bellow.

Slub yarn: This is a yarn with thick and thin placing by varying the amount of twist in the yarn at regular intervals. Basically we find it in drapery and upholstery fabrics.
Flock yarn:

The other name of these yarns is flake yarns. This is one type of novelty yarn. These are usually single yarns in which small amount of fibres either different colours or luster or both are to place by inserting into the yarn and holding in place by twist of base yarn eg: tweed fabric. This gives a spotted and short streaky appearance.
Thick and thin yarns:

These are similar to slub yarns but we make it from filament like slub prepared from staples. The pressure forcing the spinning solution varies the filament to thick in some places and thin in some.
Boucle Yarn:

The characterization of these yarn process by projecting from the body of the yarn at fairly regular intervals. There are 3 ply yarns. The effect yarns forms irregular way surface and binder ties it to the base. It has twisted core yarn.

Loop and curl yarn, Gimp yarn:
Gimp is same as boucle but the effect yarn is regular semi circular appearance, while in loop.
Snarl yarn or spike yarn:

This the same way as loop yarn using a highly twisted effect yarn, which forms snarls rather than loops.
Knop (button) yarn/knot/Nub/Spot yarn:

This feature prominent bunches of one or more of the component yarn at regular or irregular intervals. This is made on a special machine that permits the base yarn to be held almost stationary while the effect yarn is wrapped around it several times to build upon enlarged segment with brightly coloured fibres added at the enlarged spot.
Seed or Splash: They resemble knops or knot yarns but the knot segments are tiny in seed yarn and elongated in splash yarn.
Cloud: A two coloured yarn, in which both yarns take in turn to obscure or cloud the other, giving the appearance of an intermittent color change.
Spiral or Corkscrew : It is made by twisting together two ply yarns that differ in size, type or twist. These two parts may be delivered to the twister at different rates of speed.
Chenille Yarn:

These create special effects chenille means caterpillar in French. The yarn has a cut pile effect wh bound to the core on the loom warps are arranged in groups (2-6) which are interlaced in a cross weaving manner. Weft need to insert in a normal manner. Need to cut these into wrap way threads.
Metallic Yarn:

These are primarily decorative. The plastic coasting on it resists tarnishing but care must need to take while pressing as pure metals are soft, their thin films use over a core yarn that has replaced gold and slivers now. There are two methods of pressing.