According to one of my baby books, this week the baby is covered in a substance called vermix, that resembles cheese. It covers the baby's sensitive skin protecting it from the amniotic fluid. If this wasn't there then the baby would be very wrinkly at birth like when you've sat in a bath tub for too long.
According to babycenter.com, here is what will be going on with the peanut in this upcoming week:
Your baby's sensory development is exploding! Her brain is designating specialized areas for smell, taste, hearing, vision, and touch. Some research suggests that she may be able to hear your voice now, so don't be shy about reading aloud, talking to her, or singing a happy tune if the mood strikes you.
Your baby weighs about 8 1/2 ounces and measures 6 inches, head to bottom — about the size of a large heirloom tomato. Her arms and legs are in the right proportions to each other and the rest of her body now. Her kidneys continue to make urine and the hair on her scalp is sprouting. A waxy protective coating called the vernix caseosa is forming on her skin to prevent it from pickling in the amniotic fluid.