Lava

Lava is a fluid block. Sources of flowing lava are usually found deep underground, and occasionally at the surface. Lava Source blocks are also extremely common in large lakes in the Nether. Contact with lava is dangerous and deals damage to players and mobs.

Classic
In Classic, lava spreads by duplicating itself to open horizontal and downwards squares like Water. Lava is slower, though, and can be easily outrun. A quick player can block the flow of lava by building a dam. However, if the lava wave is large, a player may not be able to build fast enough. Also like water, lava slows down the player moving through it but it does so to a greater extent. Lava is also more opaque than water and is harder to see through while you are submerged. You cannot see through lava from outside it. At the bottom of the map, lava can be found directly above bedrock in a different form, as it will trap the player and prevent the player from leaving unless water is let in and collides with it, or the player hits R and respawns, or if the player places a sand block, letting it drop into the lava.

Survival
Since Infdev, lava flows more realistically across surfaces but not as much as water does. Lava will flow for a total distance of 3 blocks away from the source block (further in The Nether). Just like water, lava will flow in a single line towards the nearest terrain depression within four blocks. Items thrown into lava flows will disintegrate. Though most objects burn instantaneously, obsidian takes a few seconds longer.

The amount of damage has been reduced to a half of a heart being removed for every second the player is in lava, in addition to the damage from fire. It will however deal the full 5 hearts of damage if a lava block enters a square the player is in where there wasn't one before, such as placing one where the player is standing or from flowing lava entering the player's block. Lava is no longer present at the bottom of maps in this mode. Lava can melt ice and snow, much like torches can, but melt a larger area. Lava is luminous and a large lava flow is visible in the dark from quite a distance.

If a horizontal lava flow collides with water, Cobblestone is created, but if a vertical lava flow collides with water, the water is removed. Since Alpha v.1.0.6_03, Obsidian is created from water colliding with a lava spring. This "technique" can be used to manipulate water and lava or to harvest cobblestone and obsidian.

In Beta, lava is less reactive with horizontal water flows. It also has a chance of forming redstone ore when water runs on top of it. Lava flows or pools without a source will degrade to dirt after a given time period.

Since the 0.0.19a client update on June 20, 2009, Lava's texture became animated.

As of Seecret Friday Update 9, buckets of lava can be used to fuel a Furnace for 100 smelt; however, the bucket itself will be consumed in the process. Before the December 3rd update, right-clicking a furnace/workbench/chest while holding a lava bucket would leave you with a lava spring on top of the said item, but now it just opens the inventory as it would have if you were carrying, say, a stack of wood.

Redstone
Using a redstone wire, a one-block lava flow can be redirected by supplying power to the spring block, which will cause it to reset the flow towards the now-nearest terrain depression. This is further elaborated in this thread. It cannot, however, be reversed.

This re-calculation is made because redstone wire when toggled changes the block from redstone(on), to redstone(off). whenever a block updates on any side of lava, the lava re-calculates where to flow, but does not cut off its current direction of flow.

Spring
You can collect and place Lava blocks using a Bucket. Placing the Lava block will create a Lava spring. Sometimes lava flows will linger but will disappear given enough time. As with Water, you can only harvest these springs, not the flowing lava coming from them. Unlike water springs which can be infinitely duplicated, lava springs are finite.

Lakes
Since December 3rd, sometimes lava lakes appear above ground, usually found in Desert Biomes. This, however, is uncommon.

Furnaces
A bucket of lava can be used to fuel a furnace for long enough to smelt 100 blocks. This consumes the bucket as well as the lava.

Trivia

 * Lava is only called lava once it reaches the surface, and is called magma when underground. As such, most of the 'lava' in Minecraft is actually magma.
 * When lava is present in diagonally adjacent block to the player, the player will occasionally catch fire while running into that corner. (south-west rule)
 * Lava is a good tool for creating incinerators. It can destroy junk blocks and tools that are not needed.
 * It is impossible to create an "infinite pool" of Lava.
 * When you stay in Lava for about two seconds, your character makes noises which appear to go along to "When the Saints Go Marching In."

Lava Bucket
Lava can be collect through a bucket giving a lava bucket. However only lava springs can be collected.