Helen Allison, 52, told a jury that she had received warnings that she would be dealt with, and that "Tommy Sheridan has brought someone up from England to pull out someone's tongue".
The court also heard journalist Anvar Khan, 38, claim she had been subjected to a "vicious" verbal attack in the street by an associate of the former Scottish Socialist Party leader.
Mr Sheridan is claiming 200,000 damages from the News of the World, which he says defamed him in articles about his private life in late 2004 and early 2005. The newspaper maintains that it was true he had cheated on his wife, attended a swingers' club in Manchester and indulged in group sex.
Ms Allison told the court yesterday that she and a friend had seen Mr Sheridan having sex with a prostitute in a Glasgow hotel suite. She said that after her friend had contacted a Sunday tabloid, she had been warned: "You do not know what you are dealing with."
Ms Allison told the jury she was unemployed and last worked in market research. Through a friend, Jackie White, she had been invited with another friend, Ann Colvin, to a VIP party in the Moat House Hotel in June 2002. They were taken to a suite, but only one man was in the sitting area.
"Ann got up to have a wee wander about," she said. "She shouted on me and told me to have a look in this room. I did look in. I saw Tommy Sheridan having sex with a female at the bottom of a bed and another man sitting at the side of the bed putting a condom on."
She knew Mr Sheridan from seeing him on television, and he had smiled at her, she told the court. "I was absolutely devastated, angry ... and suddenly realised what I had been asked to ... some kind of orgy," added Ms Allison.
The woman on the bed emerged into the sitting area and told the friends that she was a prostitute. Mr Sheridan appeared, wearing a white dressing gown, and "threw himself on to the couch, very casual".
The three friends had left, but Ms Allison and Ms White subsequently lost touch, until phone calls in January last year. By then, articles had appeared about Mr Sheridan, and Ms Colvin had contacted a newspaper about the incident in the hotel, and she and Ms Allison had been to a lawyer.
"Jackie said: 'If you say anything about it, you will be dealt with ... You do not know what you are dealing with. Tommy Sheridan has brought someone up from England to pull out someone's tongue.' It was an indirect threat to me," claimed Ms Allison. She told the court she had received a call from Matt McColl, the man who had met them at the Moat House and had taken them to the suite.
"He said: 'If it's money you are wanting, I can help you with money.' I said it was not about money. One day, Matt McColl was sitting outside my house and Jackie phoned to tell me he was coming in to see me. She pulled up and said to him he could not go in because I had a child there. She said Matt McColl was sweating and very angry.
"I felt very nervous, very unhappy that I had been taken there [the hotel] in the first place and just very sad that the whole thing had happened."
Yesterday the court also heard of threatening behaviour towards Ms Khan, the writer and broadcaster, who told the Court of Session that a woman ranted at her in an "extremely threatening" way. She named the woman as Robina Qureshi, the director of a housing charity, who had later apologised and said she was acting on behalf of Mr Sheridan and his wife, Gail.
Ms Khan had previously told a jury that she visited a swingers' club with the MSP. The court has heard that just before Ms Khan was about to have a book published, the News of the World ran a story about it under the headline: "Married MSP is spanking swinger." It had not named anyone, but Ms Khan said the article, a "puff" for her book, referred to Mr Sheridan.
Graeme Henderson, counsel for Mr Sheridan, asked Ms Khan if she had sought to sell her story to various newspapers in advance of the book's publication.
"I did not want to bring this up, but when the puff for the book came out, I was under a lot of attack from the Scottish press. I was somewhat demonised. My security and that of my family was under threat," said Ms Khan.
"I was walking down Byres Road in the West End [of Glasgow] when all this came out and I was attacked. I was with my partner and his son, who was eight ... it was an extremely threatening, vicious attack. A woman ran out of a car, came right up into my face, started screaming at me ... extremely sexist abuse, disgusting abuse. Her hands were behind her back. I thought she had a weapon."
Ms Khan said she had taken Ms Qureshi, the director of Positive Action in Housing, to court and had extracted from her a written apology: "In her apology, she says she attacked me on behalf of Gail and Tommy Sheridan."
The trial continues.