Lava is one of the many Liquids that exist in Creativerse.
As there are no volcanos in the game (yet), Liquid Lava can usually only be found on the Lava layer underground on every Creativerse gameworld. Liquid Lava can also be "produced" by players by throwing Fire Bombs at blocks of Hardened Lava (which cannot be produced by throwing Fire Bombs against blocks of Igneous Rock any longer).
On the Lava layer, Liquid Lava often forms lakes and sometimes low cataracts, but no vast oceans. Occasionally Liquid Lava can even drop down through holes or caverns as far as into the Corruption layer.
Liquid Lava can be deadly for player-characters and most Creatures (like Keepas for example) because it inflicts fire damage immediately when being touched, no matter how full or empty the heat meter (scale) is. The heat meater will show up when being and staying close to hot blocks or liquid like Lava itself - and when the heat scale is fully red, the player character will start to burn and be dealt fire damage over time.
However, creatures and player-characters won't die immediately even when falling into Lava. Instead, touching liquid Lava will set characters and Creatures (except for Hot Feet and all Pets) on fire, which will deal burning damage over time that will last at maximum for about 3 seconds long after stepping away from Lava.
On the other hand, Liquid Lava is useful for cooking certain kinds of Food in the Cooking Station, like Blazing Soups, Blazing Breads, Blazing Sandwiches and Blazing Pies that will give player characters some resistance up to complete immunity to fire damage - some types of Food will even transform the damage over time that is inflicted by burning into healing over time.
You will not need to unlock any specific recipes other than the basic ones (only 4 currently exist: Soup, Bread, Sandwich, Pie) for this, as depending on the ingredients used, different types of Food can be created with only these 4 recipes.
Liquid Lava will not cause any damage when being foraged, being carried in the inventory or any quickslots, and it will also neither burn anything nor change when being stored in containers.
Fire Resistance Potions will not provide immunity to fire damage inflicted by lava, they will only reduce the fire damage over time to half of it's intensity, however it also seems that player characters burn less long. These potions mainly negate the heat scale/meter that shows up and is starting to fill itself with red color when the environment is very hot.
Liquid Lava can also be hardened to Hardened Lava (which makes good Fuel) by either placing this liquid into cooler biomes, by pouring Water or Mineral Water on it or upon throwing Freeze Bombs at it. Liquid Lava (currently) cannot be used as a Fuel directly in the Forge.
To keep Lava fluid outside the Lava layer, you will have to place enough units of Lava together, best packed into a pool made from some blocks of Hardened Lava which will heat up their surrounding. Beware: Hardened Lava blocks can make Hot Feet spawn, and these aggressive Creatures can swim in liquid Lava unfazed - however they will start to burn and then perish if being hit by sunlight. It is actually possible (but unconfirmed yet) that liquid Lava itself is also able to make Hot Feet spawn.
Placing flammable blocks, materials and objects like wooden furniture (for example Wood Doors) or wooden building-blocks (like Wood Walls) next to or into liquid Lava will immediately set them on fire that will then completely consume them.
Also placing liquid Lava next to flammable blocks/items will have the same effect (until the Lava turns into Hardened Lava blocks) and can then spread fire onto other flammable blocks nearby, so a whole wooden building or forest can burn down by that in time if you try this on the surface.
Fire cannot be extinguished by using liquids, but it can be stopped from spreading by claiming the area and making sure that the claim (advanced) option "fire sim enabled" is disabled. Currently fire will not spread and Fire Bombs will have no effect on player claims by default, but this option can be toggled by the claim owners.
It is also possible for owners of the gameworld (F2P players too) to toggle the spreading of fire on a whole gameworld in the basic world options ("edit world" and "disable fire spread"). Another option to stop fire from spreading would be to create forest aisles/swaths wide enough so that the flames cannot leap over.