Lava

'Pikachu ''

Lava is a glowing red/orange liquid found deep in the Cavern layer and in The Underworld, appearing instead of Water at depths below 1,500 feet (750 tiles) in a small world, 2,300 feet (1,150 tiles) in a medium world, and 3,350 feet (1,675 tiles) in a large world. Tiny pools can frequently be found on the outskirts of the underground desert as well, even as high as 200 feet below the surface.

Contact with Lava deals 80 damage per hit on players and 50 damage per hit on enemies, and inflicts the On Fire! debuff on both. Lava also slows movement the way Water does. The Obsidian Skin Potion makes players immune to Lava damage, and the Lava Charm and its derivatives will allow players to be safely submerged in lava for 7 seconds.

Lava flows downwards and horizontally, settling and taking the shape of any block formations below and beside it, the way Water does; however, Lava is more viscous than Water, flowing more slowly. It also emits a medium amount of flickering light. Lava can be moved by the player via a bucket or pump. After flowing 50 blocks in a direction, lava will begin to evaporate, causing the source to be lost. Lava will destroy most furniture and platforms, except Obsidian and Stone Platforms.

Most dropped items of White Rarity (which includes all Coins) will be destroyed when submerged in Lava past their vertical midpoint. Blocks cannot be placed directly within Lava, but falling blocks like Silt and Sand can fall into it, resulting in placement at its bottom, and these can be stacked until reaching the Lava's surface to form a safe bridge over it. Silt and Sand blocks placed this way will revert back to Lava if mined away. However, one can use this method and log out. Upon logging back in, most of the lava will be gone.

Hellstone produces half a block's volume of Lava when mined in the Underworld (a full block's volume in Expert Mode). Lava Slimes create a small amount of lava when slain in Expert Mode.

Unlike with water, lava's color does not depend on the biome the player is in.

Crafting
Like water and honey, lava can be used as a minor crafting station. It works just like those two; in order to use it the player only has to stand nearby. Creation of items from a body of lava does not lower the lava level at all.

Used to craft
Lava can also be used to make the following items, though not as a crafting station:

Fishing
Fishing in lava requires the use of the Hotline hook, Lavaproof Fishing Hook, or bait found in the Underworld.
 * It is not possible to get other catches normally obtained in water.
 * It is advisable to make a large artificial lava lake near the surface where the enemies are less dangerous.
 * Do note that while this may be more difficult at first, it will save many deaths and coins.
 * This also requires you to collect Underworld bait before you can fish, and you may end up needing a lot of bait before you get a lavaproof fishing hook.
 * If you have access to Pumps, a Bottomless Lava Bucket or a Wet Bomb (the latter two are both acquired by fishing in lava) making an artificial lava lake is quite easy

Tips
A few basic techniques go a long way:

A shallow lava pit underneath a structure will kill all walking enemies as they attempt to jump towards you while you're in your house, and if shallow enough, will gather their drops in one location for easy collection later. You can also use this technique to upgrade regular pits. Standing underneath the pit will lure most enemies toward you, with even some flying enemies diving into the lava.

Lava Depth
Lava will destroy any item of White rarity (Other than the aforementioned exceptions) including Coins, if it is deep enough for the item to sink past its midpoint. (That is, items with larger sprites can survive deeper lava.) This allows making pits with lava just deep enough to burn copper coins, but (almost) nothing else:
 * If too many items (over 400) accumulate in the world, the oldest ones will despawn.
 * Copper coins are among the least valuable objects in the game, but each stack of them still counts as an item. An event or enemy farm can produce huge numbers of copper coins, so it's worth discarding them, against the risk of despawning more valuable items. Fortunately they are also among the smallest items in the game (with a sprite only 12 pixels high).
 * A notable exception: The far more valuable Lihzahrd Power Cell also has a 12 pixel high sprite, and will be destroyed with the copper coins.
 * Other notable heights: Silver coins and gel share a 14-pixel height, while block items are 16 pixels tall.
 * To check if a lava moat has the exact depth required, a player can throw in one copper coin, then one silver coin. The copper coin should burn, but the slightly taller silver coin should not.
 * In practice, this lava depth can be achieved with 1 Bucket of lava for each 6 to 8 tiles of pit length.
 * Thus a moat that is 6-8 blocks wide, should have one bucket thrown in, while a moat of 12-16 should have 2.
 * This implies avoiding lengths where this range can't be achieved: 1-5, 9-11, 17. A moat 18 or more tiles long can always be filled to proper depth.
 * When filling a very large moat, it is best to drop individual lava buckets over the width of the moat, and not throw it on the same spot, due to unreliable liquid physics.

Trivia

 * In the real world, lava is molten rock, but the term is usually applied only when it is expelled above ground as the result of a volcanic eruption. Lava, as found underground in Terraria, would typically be termed magma instead.
 * If you stand in lava too long, the death message says magma instead of lava.