Grass

Tall Grass spawns on Grass blocks in certain biomes. Tall grass is not a solid block, but rather an aesthetic plant that does not obstruct movement, similar to Sugar Cane, Dead Shrubs and Wheat. It occurs naturally and in larger quantities than these plants. Bone Meal can be used on a grass block to grow Tall Grass and occasionally Flowers on it and in its vicinity.

Tall grass has three variants (defined by its data value).
 * Tall Grass (the most common)
 * A triangular-looking fern (also known as "living shrub")
 * A dead shrub-looking plant that does not occur naturally, but can be obtained by placing grass in a desert biome and using bone meal on it. (not to be confused with the Dead Shrub appearing in desert biomes)

All three variants will occasionally drop Seeds when broken; a hoe is not required to produce seeds from this block. In Beta 1.8, Tall Grass will be collectible if shears are used on it.

The non-naturally occurring dead shrub-looking variant is not the same as the Dead Shrub. The real Dead Shrub will generate naturally in desert biomes, on Sand, and will not produce any resources when broken. The Tall Grass variant is not naturally-occurring (can be acquired by using bone meal on grass in a desert biome) and even though it looks like a Dead Shrub, it cannot be placed on Sand, and will drop seeds like the other variants of Tall Grass.

Uses
Harvesting Tall Grass is the primary way of obtaining Seeds, the secondary way being harvesting fully grown Wheat. Because wheat drops many more seeds, tall grass is only useful in the start of the game.

Tall Grass spawned with Bone Meal can be used for aesthetic purposes.

Tall Grass can be obtained by left clicking on it with Shears

History
Tall grass was first implemented in Beta 1.6 as a natural block. Seeds used to be produced by harvesting grass blocks with a Hoe prior to this update.

As of Beta 1.6.6, Bone Meal can be used to instantly grow Tall Grass on grass blocks.

Trivia

 * Tall Grass cannot be directly set on fire from lightning. However, fire from nearby blocks can spread to it. Oddly enough, the top of Tall Grass can be lit but it will not burn this way.
 * The color of tall grass is biome dependent and usually the same color as grass.
 * Tall Grass is slightly offset from the block it is sitting on (as seen in the fifth screenshot). Jeb has said this is probably intentional to give it a more "wild" appearance.
 * It is currently possible to place blocks on top of tall grass, although the grass will (in most cases) get destroyed afterwards.
 * Tall Grass only appears in new chunks generated after Beta 1.6 has been installed.
 * Tall grass has been known to appear in chunks generated before 1.6 in SMP.
 * A "tall grass" mod existed long before the official release of tall grass, however, it was not used to make the in-game grass.
 * Tall grass cannot be acquired as an item without inventory hacking. Hacked tall grass will appear as the "dead shrub" variety when placed on the map. This will change in Beta 1.8, however, when Tall Grass will be collectible through use of shears
 * Seeds can be collected from Tall Grass using TNT.
 * Tall grass can appear in caves on dirt near lava, as it has been found within a few blocks of bedrock.
 * Right clicking grass with bonemeal may spawn Tall Grass and flowers.
 * In SMP, right-clicking grass with bone meal in a spawn-protected area will still produce tall grass and flowers (Although there is no way to remove them afterwards)
 * When touched by water, Tall Grass will break with the possibility of dropping seeds. A quick way to gather seeds is to route water to the top of a grass-covered hill and let it flow down. Although, usually a player will have more than enough seeds before he has the 3 iron required to craft a bucket.
 * The triangular-looking fern (also known as "living shrub") is rare, and only found in Swampland and Rain Forest biomes.
 * In the Pre 1.8, Tall Grass will randomly grow if there is a light source (& Water?) near grass. (Possible Chunk Error if not loaded already)
 * In Pre 1.8, it is possible to collect Tall Grass with shears.