Mushroom

Mushrooms are a type of fungi in minecraft. Mushrooms function as a decorative item in Creative Mode, a food/hazard in Survival Test, and as a food item in Alpha.

Mushrooms do not grow in sunlight. In Alpha, they grow in places with little natural light such as cave entrances, deep underground near lava, or under trees, particularly in forest biomes. Mushrooms also grow in The Nether's extremely low light conditions. In rare instances while playing Infdev, mushrooms are sometimes generated growing under trees or in the shadow of other floating continents in the "Floating" map type. Brown mushrooms may be generated in the open when exploring during night, at least in the latest Alpha version. Mushrooms growing in the open will pop out of the ground when struck by sunlight, leaving a mushroom that may be picked up. Mushrooms may be planted in direct sunlight, but will pop out of the ground in short order.

There have been several bug reports of mushrooms growing on top of trees in mid-daylight without being destroyed. This is a fairly rare occurrence, and searching for mushrooms on top of trees is probably more trouble than it's worth.

It is not known whether mushrooms can be grown.

As of the 1.2 update it seems that mushrooms are now more commonplace, probably due to the addition of biomes.

Brown Mushrooms
In Survival Test, Brown mushrooms heal 2 and 1/2 Hearts. However, from Indev onwards, a Brown mushroom is used along with a Spotted Red mushroom (and a bowl) to create Mushroom Stew which heals 5 hearts. Brown mushrooms are somewhat rare in all survival-based game modes.

A brown mushroom emits 1 light, just enough to make itself visible in pitch darkness.

Spotted Red Mushrooms
In Survival Test Red mushrooms hurt the player for 2 and 1/2 hearts. From Indev onwards, Spotted Red Mushrooms are used along with Brown Mushrooms and a bowl at a workbench to create Mushroom Stew, which heals 5 hearts. Red mushrooms are also somewhat rare in all survival-based game modes. In Alpha when you Teleport to The Nether, these are much more abundant in quantity.