The Mushroom is a crafting material and healing item that spawns randomly on grass or Hallowed grass located on the surface, generally in the Forest. It can be cut with any tool or weapon in order to retrieve the item.
On the Desktop version Desktop version, the Mushroom inflicts only 30 seconds of Potion Sickness, two times less than the healing potions. Even so, it can only heal 30 health every minute, compared to Lesser Healing Potion, which heals 50.
Used in:

● Bowl of SoupBowl of Soup

● Lesser Healing Potion

● Regeneration Potion

● Restoration Potion

Mushrooms have a high sell value for the early game (40 Mushrooms sell for 1 gold), plus they are very common and can be farmed.

Mushrooms grow on any free grass tiles in the surface layer, meaning they can be easily farmed by placing grass in strips. The grass can be grown by connecting dirt to existing grass, by planting Grass Seeds, or by using the Staff of Regrowth. Only one tile of vertical clearance is required, so dirt strips can be placed close together in groups of three (more than that and you may not be able to harvest them), one tile apart vertically. Mushrooms will not grow if there is a wall behind them, so make sure the sky is visible behind the dirt strips. They do not require water to grow, and can spawn while on-screen. Such a farm also needs regular clearing — Mushrooms will not replace grass, but require empty tiles to grow.

With the Dart Trap mechanism, farms can be automated to some degree. The Dart Trap(s) can be linked to a Pressure Plate at the farm's entrance or to a Timer. A launched dart will cut all grass and Mushrooms that it comes into contact with, allowing the player to simply run across the farm and pick up the dropped Mushrooms without a single swing of their sword.

Tips
Using a Mushroom as a healing item is rather inefficient as it can be crafted into two Lesser Healing Potions which restore 50 health each.