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Ghee is butter that has been clarified, then browned a bit, leaving behind pure butter fat with a high smoke point. The browning gives the Ghee a nutty, caramelized flavour and taste.
Traditionally, people in India would collect the cream off the top of buffalo milk and the cream from the top of boiled cow's milk (all milk in India is boiled before using.) This skimmed-off cream is called "malai." The malai is stored up until there's enough to do anything with. Some yoghurt is added, which provides friendly bacteria to store it safely, and help it develop a slightly sour taste. When there is several days worth of collected cream they churn it for butter, then heat it to make ghee from. The butter includes lots of milk solids, included the solidified cream skin that was skimmed off the boiled milk. This provides lots of bits to carmelize on the bottom while making the ghee, more than would be present commercially, giving it a very pronounced nutty taste, like the French Beurre Noisette. But even though this homemade taste was better, most Indians don't bother anymore, they just buy it already made in cans imported from Australia, which is made from cow's milk.
Usli Ghee
This is real Ghee -- Ghee made from butter, as described below under cooking tips.
Vanaspati
A Ghee made not from butter, but from hydrogenated vegetable oils. It is cheap, convenient, and popular in India. You buy it at stores, but with what we know about hydrogenated fats now, not as good for you as the real thing. Indians say, though, that the taste is very close to the "Usli Ghee".
Cooking Tips
To make Ghee: melt butter then simmer over very low heat for about 10 minutes. After 10 minutes, there should be a thin crust on the top. Skim that off. Stir, and cook until the milk solids brown at the bottom of the melted butter -- this may take another 10 minutes. Pour off the melted butter (strain through muslin or paper towel, if you wish) into a jar or dish, being careful to leave the browned bits behind. Discard them.
Many people suggest that unsalted butter should be used.
Substitutes
Oil; Butter
Equivalents
8 oz Ghee = 240 ml = 1 cup
Storage
Ghee stores better than butter, because the water and dairy solids are removed. Though in India many people store Ghee at room temperature, it will keep better refrigerated in a sealed jar for up to 2 to 3 months.
Also called:  Beurre clarifié (French) Butterschmalz, Klarifizierte Butter (German)
Other entries for Butter
Beurre d'Isigny, Beurre de Baratte, Butter Stick, Clarified Butter, Compound Butters, Concentrated Butter, Cultured Butter, Dehydrated Butter, French Butters, Ghee, Light Butter, Margarine, Pasteurized Butter, Plugrá Butter, Raw Butter, Rendered Butter, Renovated Butter, Salted Butter, Semi-salted Butter, Spreadable Butter, Summer Butter, Sweet Cream Butter, Three-Quarter Fat Butter, Unsalted Butter, Whey Butter, Whipped Butter
Other entries for Dairy
Butterfat, Cheese, Milk, Nondairy Topping
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