Lava

Lava is a liquid found commonly in large pools once the player has reached a certain depth (about 2000 feet below on the Depth Meter). They cause a large amount of damage to the player and monsters, and often times falling into lava is lethal. If water touches lava, the lava turns into Obsidian. Burrowing monsters seem to have an immunity to lava damage.

Lava deals 100 damage to the Character modified by the player's defence, and 50 damage to monsters modifed by the monster's defence. Lava incinerates dropped items that are 100% covered by a lava tile.

It is possible for a thin layer of lava to cover a surface, and cause damage to monsters and players, but not destroy items. Lava spreads over a flat surface, and some lava will remain even if scooped back into a bucket. Lava which cannot be retrieved by bucket can be erased simply by placing any brick or block in its place.

When in Multiplayer, when lava is poured from a bucket, it turns into water for a brief moment, so when you try to duplicate it, it may actually produce some obsidian!

Duplication
Make a large pit 1 block deep, and another pit below that. Pour a bucket of lava into the top pit and bucket it back out, mine a hole to allow the remaining lava into the lower pit. Now bucket that out and enjoy!

This procedure can have varying results, sometimes it will work great and you will even have lava left over in the lower pit. Other times it can be less successful, only yielding one duplicated bucket per two normal ones.

Read more about duplicating liquids.