"Nature's carpet. She might make you take your shoes off."
Grass blocks generate naturally. Since patch R16 blocks uncovered Dirt will automatically change into Grass on the top when touching at least one block of (green) Grass. Unlike mentioned in the Release Notes, this is not limited to blocks being hit by sunlight, but it works underground too. Dirt will not change into Grass when being used in Blueprints though.
In dim lit areas it will take significantly longer for Dirt to change into Grass, and if you cover Dirt like by placing any kind of item on top of it, it definitely won't change to green Grass. Sometimes Dirt also does not seem to change into Grass in Swamplands for no apparent reason.
Currently (as of R29 in March 2016) Dirt will not turn into Savannah Grass nor Dead Grass if touching these blocks. Generally Dirt turns to Grass faster if player-characters are present and way slower if there is no one near.
Pigsies (during daytime) and Night Pigsies during the night tend to spawn on (green) Grass even in very low spaces of only 1 block if that area isn't lit by artificial light (torches, lamps, lanterns).
Also Leafies (during daytime) and Night Leafies (during the night) might occasionally spawn on Grass. More Red Mushrooms, Turnips or Lettuce can slowly spawn on Grass here or there in time. The longer you play, the more of those will spawn.
Wood Treasure Chests can spawn on Grass blocks during (ingame-)night-times occasionally in dark places in range of view of player-characters too, no matter where these Grass blocks are placed, could even be in the Corruption layer.
You can mine ("pull") Grass without any Power Cell needed, and you will then obtain the grass block directly. These blocks can be placed too. If Tallgrass or Red Mushrooms have grown on a block of Grass, you will also receive them when pulling the Grass away under them.
Grass (blocks) can be used to craft following blocks:
- Grass Slabs (simply made in a Processor without any crafting recipes
- Grass Slopes (also made in a Processor without requiring a recipe
- Grass Stairs (made from Grass Slabs), Natural Stone Path (needs: 1 Stone Rod, 2 blocks of Stone, 2 blocks of Grass),
- Decorative Stone Path (after finding the recipe in a Wood Treasure Chest you'll need: 1 Melted Wax, 2 Stone Rods, 4 blocks of Grass, 4 blocks of Stone
A block of Grass can be corrupted if Corrupted Water is placed directly next, under or over it, but not diagonally. Throwing Corrupt Bombs can corrupt up to 7x7 blocks of Grass plus ca. 4 blocks of any corruptable blocks underneath, like Dirt or Stone.