Grass

Tall Grass was implemented in the game in Beta 1.6. It spawns on Grass blocks in certain biomes. Seeds are no longer able to be produced by grass blocks and only spawn from harvesting these blocks. Little else is known about it, however. Tall grass isn't a solid block, but rather an aesthetic weed that does not block movements, similar to Sugar Cane, Dead Shrubs and Wheat. However it occurs naturally and in larger quantities than these plants. In Beta 1.6.6, Bonemeal used on a grass block grows Tall Grass and occasionally Flowers on it and in its vicinity.

Tall grass has three variants, depending on its data value in the map.
 * Tall Grass (the most common)
 * A triangular-looking fern (also known as "living shrub")
 * A dead shrub that does not occur naturally (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.

It's important to note that the non-naturally occurring dead shrub 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 only be acquired through hacking the data files, or through mods), 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.

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 the same color as grass.
 * Tall Grass is slightly offset from the block it is sitting on (as seen in the third screenshot). Jeb_ has said this is probably intentional to give it a more "wild" appearance.
 * If inventory editing is used to acquire this item, a variant of it that looks like a Dead Shrub, but that can give seeds, will be placed rather than normal tall grass or fern.
 * It is currently possible to place blocks on top of tall grass, although said grass will (in most cases) get destroyed afterwards.
 * Tall Grass only appear 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.
 * Seeds that were generated prior to 1.6 will have tall grass, despite a lack of change in the actual terrain of the seed.
 * 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, when first introduced, could not be recovered after being harvested without inventory hacking.
 * Seeds can be collected from Tall Grass using TNT.
 * Tall grass can appear in caves, as it has been found within a few blocks of bedrock.
 * Placing a block above tall grass destroys the grass beneath it. Doing this sometimes yields seeds.