Sandstone

Sandstone is a solid block. It is found naturally at the bottom of sand stacks, and can be crafted by putting four blocks of sand in a square. Hence creating sandstone does not require the use of a crafting table.

Chiseled Sandstone is a kind of sandstone with a Creeper face and various small carvings on it. It can be crafted by placing one sandstone slab on top of another, and thus does not need a crafting table, for you can use your inventory crafting. (However, the sandstone slabs themselves would need a crafting table.)

Smooth Sandstone is a kind of sandstone with a smooth looking texture. It can be crafted by placing four blocks of sandstone in a square, so it does not require the use of a crafting table, for, in the similar way of Sandstone and Chiseled Sandstone, it can be crafted in your inventory.

Function and behavior
Unlike sand, sandstone is not affected by gravity, and it will not fall if placed without a supporting block underneath it. It normally appears at the lowest levels of sandy areas and supports the sand above it, but if a lake is generated in that same volume, it may carve away the sandstone and result in volumes of unsupported sand which will collapse if disturbed. Sandstone's appearance makes it highly suitable for desert-themed architecture.

If the player spawns in a desert biome in a survival mode game, sandstone will be readily obtainable for the player to build a shelter with. Bear in mind that it requires four blocks of sand to compress into a single block of sandstone. Placed sandstone can be harvested with any pickaxe. Breaking a sandstone block by hand destroys the block but drops no resources; it takes slightly longer to mine it with bare hands than with a wooden pickaxe.

Sandstone can be crafted into Slabs. Because slabs are currently represented in the game by using different data values for a single block type, sandstone slabs behave as if they were made of stone. This means they take longer to mine and have much greater blast resistance than the sandstone blocks from which they were made. Sandstone's blast resistance is otherwise similar to sand or grass block, and is much less than that of wood or stone.

Sandstone is the material used to generate a covered structure known as a desert well. These appear occasionally in desert biomes. They are 5x5 blocks in size and have a 3x3 volume of water in the shape of a plus sign in the center. They may sometimes be useful for obtaining water, although deserts often tend to have lakes or oases in them anyway.

Trivia

 * As of version 1.2.4, both Smooth Sandstone and Chiseled Sandstone can be used in all the same ways as sandstone, including making Smooth Sandstone, or slabs for Chiseled Sandstone. Their output rates ultimately give no material loss nor gain. It should be noted that it is not possible to convert any of these blocks back to normal sandstone, but two slabs can be used to attain the same look.
 * Sandstone is the only block that uses only itself as a material to create a variant of itself (Sandstone or Smooth Sandstone to Smooth Sandstone).
 * Sandstone is among the weakest blocks that cannot be harvested by hand, along with snow blocks and netherrack.
 * Sandstone can be found underneath beaches in non-desert biomes. (Tested in 1.3.1 in on a beach in a forest biome)
 * If you look carefully at a smooth sandstone you can notice the number "2" on it probably formed accidentally by the variation of its pixels' colors.
 * Smooth Sandstone acts as regular sandstone; you can put 4 smooth sandstone in a square and make 4 of itself in a crafting table.
 * As mentioned above, since Slabs are treated as stone in terms of blast resistance, converting a stack of 63 Sandstone blocks into 126 Sandstone Slabs and then building using the slabs in pairs effectively provides the same appearance as using Sandstone blocks but with 7.5 times as much blast resistance. (current as of 1.4.6)