Grass

Tall Grass (named Grass in the inventory) 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 Bush 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 bush-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 Bush appearing in desert biomes)

All three variants will occasionally drop Wheat Seeds when broken; a hoe is not required to produce seeds from this block. Tall Grass and Shrubs can be harvested by using shears, but the Dead Bush cannot.

The non-naturally occurring dead shrub-looking variant is not the same as the Dead Bush. 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 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.

Water will destroy any tall grass in its way, so one can easily clear large areas covered in grass by using a Bucket to place water, then pick it back up once it has spread.

Uses
Harvesting Tall Grass is the primary way of obtaining Wheat 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.

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.

Before 1.8, tall grass couldn't be acquired as an item without inventory hacking. Hacked tall grass in your inventory would appear as the base texture for it, and would appear as the "dead shrub" variety when placed on the map. This was changed in Beta 1.8, and now Grass and Ferns can be harvested with Shears.

The triangular-looking fern (also known as "living shrub") was rare, and only found in Swampland and Rain Forest biomes pre-1.8. At present, since Swamp biomes have been redesigned and Rain Forest removed entirely, "living shrubs" no longer generate naturally. However, as of Minecraft 1.0.0, living shrubs have been made available in creative mode and is renamed "Fern."

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 is usually the same color as grass.
 * Tall Grass is slightly offset from the block it is sitting on (as seen in the second 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 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 can appear in caves on dirt near lava, as it has been found within a few blocks of bedrock.
 * In SMP, using bonemeal on grass 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.
 * Tall grass can be found on dirt blocks as well as grass blocks due to a bug in the terrain generation.
 * Tall Grass held by the player is seen as grayscale from another player's screen in SMP. This also happens with vines and possibly grass blocks.
 * Fern or Living Shrub is extinct in SSP due to the removal of rainforest biomes as of 1.8.