Pillwort looks like a tiny rush but it is a true fern. To protect its spores from drying out, the plant has encased them in small balls - hence the name Pillwort. If the plant is removed from soil the `pills` can be found around the roots. 

Pillwort is a typical pioneer plant. It grows on poor soils that are periodically flooded. As soon as higher plants are able to establish there, it will disappear. In the past it grew in fish ponds and other periodically flooded places. Today it became rare and chances are best to find it in moors and military training grounds (where it found a new home in water filled skid marks of tanks). On the whole it is now quite rare and it is still becoming rarer. It looses possible habitats and it will disappear where nutrients appear. If you want to grow it in your pond be prepared to remodel its location regularily. Exchange the soil to remove nutrients and weed out all other plants.