Milk Bucket

Milk is an item obtained from Cows and Mooshrooms by right-clicking on them with an empty bucket. It can be used as an ingredient in cake, or can be used as food on its own.

Usage
You can milk a cow infinitely as long as you have enough buckets. Right clicking with a full bucket of milk will start the drinking animation. It doesn't fill up the hunger bar, but will immediately cure the Player of any status changes or cancel the effect of poison and other potion effects.

Since it cures poison, an ideal source of food would be rotten flesh followed by a bucket of milk, which will restore hunger and then cancel out the poison, respectively. This would only require a cow and an open space for zombies to spawn on at night.

Because of its ability to cure status effects, it is a good idea to take it into an Abandoned Mine Shaft for curing the poison from Cave Spiders.

Punching A full grown animal mob (sheep, cow, pig, chicken, cats and dogs) with a bucket of milk will return it to its babby state using up the milk.

History
Milk was first introduced in Alpha 1.0.8, but had no purpose until Beta 1.2 when it was incorporated into the crafting recipe for cake. It wasn't edible until Beta version 1.8.

According to a tweet by Jeb on September 30th 2011, milk was made a cure for all potion effects in Beta 1.9 Pre-release 2.

Trivia

 * From Beta 1.2_01 to 1.4, Squid could be milked by right-clicking on their mouth if part of their body was exposed to air or if they were not touching another block. An easy way to accomplish this was to pull a squid with a fishing rod away from other blocks and then milk it. Squid milking was removed in the 1.4 update.