Also called peripatus, velvet worms are not actually closely related to worms as we traditionally think of them. What we normally consider “worms” are members of phylum Annelida, for segmented worms. Annelida includes earthworms, centipedes, and millipedes. Velvet worms occupy the phylum Onychophora, which shares traits with both annelids and arthropods. (Arthropoda is the largest phylum species-wise, containing insects, spiders, shellfish, scorpions…).
Pic Source: http://farm5.static.flickr.com/4109/5049948235_00cf4c5911.jpg
Info Source: http://www.angelfire.com/mo2/animals1/phylum/velvetworm.html