I just bought this pattern ; it doesn't say how the finish as a pillow. From the pic it looks appliqued on the pillow with 4 fabric covered buttons as decoration. You could probably sew up the pillow from the picture. These French Country designs are small, so probably a 12" or 14" pillow.

I saw a similar pattern in a German shop once and then a lady actually brought in the finished product. It was the pillow case itself with a length of ribbon (probably bias cut) in each corner. The cross stitched piece (Hummel figurine motif) was bound with the same ribbon and then tied to the pillow. I hope I'm describing this so it makes sense. I've also seen it with botton holes and bottons. The bottons would be on the pillow. This way you can launder the stitched part separately and, hopefully, less frequently. If the motif is detachable then you might want to line the back. As to your question, jlhewes is most likely correct in that it is an applique. I've never done anything like this because I am NOT a sewer. :(