Mushroom

Mushrooms are a type of fungi that currently function as a food item in Minecraft Alpha and Beta.

Brown Mushrooms also glow with light level 1, but Red Mushrooms do not.

Growth
Like flowers, mushrooms can be collected immediately with any tool. As of Beta 1.6, mushrooms spread very slowly. While mushrooms may be planted in direct sunlight, they will pop out of the ground if the light level is more than 12 and any square touching them updates. Mushrooms can also be found in the nether.

In the latest Beta version, mushrooms may be generated in the open when exploring during night, or under low-light conditions. As of the 1.2.0 update in Alpha, it seems that mushrooms are now more commonplace due to the addition of biomes.

Several bug reports have mentioned mushrooms growing on top of trees. As this is a rare occurrence, searching for mushrooms on top of trees is probably not an efficient way to forage.

Red mushrooms are less common than brown mushrooms in all survival-based game modes, although they are much more abundant in The Nether, as are brown mushrooms, due to the consistently low light conditions of the realm.

Uses
Mushrooms are used to heal a good amount of health but are hard to get early in the game. They can also be used as decoration, provided that if they are placed at squares with a light level of 13 or more no adjacent squares are allowed to update. This means that two mushrooms next to each other cannot be used as decoration at this light level, as placing the second will cause the first to "pop" out of the ground.

As a Crafting Material
The order of the mushrooms does not matter.

History
In Creative Mode, mushrooms were a decorative item and in Survival Test, a food and hazard. Pigs were able to eat mushrooms in Survival Test, but the feature has since been removed, along with sheep eating grass. In Indev, mushrooms were sometimes generated in rare instances under trees or in the shadows of other floating continents in the "Floating" map type.

Brown mushrooms healed in Survival Test, but from Indev onwards, they were unable to be eaten on their own.

In Survival Test, the consumption of red mushrooms caused damage to the player's health. From Indev onwards, spotted red mushrooms are used along with brown mushrooms and a bowl to craft Mushroom Stew.

Trivia

 * In Classic, mushrooms could be placed on any block except another mushroom, and would not break immediately when the block below them was removed.
 * As of Alpha patch 1.2.2, there is a glitch that will cause any block with a brown mushroom to be nearly pitch black. This may have something to do with the fact that mushrooms need to be in darkness to survive, or that the mushroom set the light level back to 1 after lighting was already calculated.
 * Red Mushrooms strongly resemble real Amanita muscaria (Fly Agaric) mushrooms; which are poisonous unless properly prepared, and have deliriant / psychedelic effects when consumed. This makes them inedible in the real world.
 * Red Mushrooms seem to spread faster than brown mushrooms.