Lava

Lava is a substance found at an approximatly 1900-2300ft depth. If a player comes into contact with lava, it will deal a large amount of damage over time the player, usually leading to death. Lava, with water, is the only way you can obtain obsidian, mixing (or touching) the two liquids will cause the creation of an obsidian block. This could be difficult due to the lack of water at -2100ft depths, Earthwelling is an effective way to harvest vast amounts of obsidian. Lava can also be transported in a bucket.

Lava functions the same as water, meaning you will lose air when submerged and you require Flippers to swim effectively in it.

Items that are thrown in the lava are destroyed. Therefore, use caution when you are accessing your inventory near lava. The midpoint of an item has to collide with lava for it to be destroyed.

Trashcan
Because items in Terraria can never really be disposed of (just dropped on the floor), many players chose to have a small Lava pit in their house. By ditching unwanted items into the pit, players are guaranteed to never accidentally pick it back up. This effectively makes the Lava an item Trashcan.