Diacetyl is a natural by-product of fermentation. It is detectable in beer at concentrations as low as fifty parts per billion. At low levels, it gives beer a slick mouthfeel; at higher levels, the flavor becomes buttery — diacetyl is in fact what they make artificial butter out of — then like butterscotch, and eventually downright rancid. First I'll let you know where the diacetyl comes from, and then I'll tell you how to get it out of your beer.
What to do about it: You're not going to believe how simple this is. Do a “diacetyl rest”; that is, leave your beer in the fermenter for two or three days after it looks like the fermentation is complete. That's it. That will give the yeast time to clean up the diacetyl they've produced. If you're brewing an ale, the fermentation temperature is already high enough that the cleanup will proceed rather quickly. If you're brewing a lager, try this trick: start allowing the fermentation temperature to rise once the beer has fermented to half its original gravity. By that point, you're far enough into the fermentation that the yeast aren't going to generate any more “ale” characters (such as fruity esters) and you've still got enough time to let the temperature rise to a useful level, say, 65°F. Maintain this temperature until the diacetyl is gone or until the end of fermentation, whichever is later, then rack for lagering.
How can you tell if the diacetyl rest is complete? There's an easy “forcing” test that will only cost you a few ounces of beer. Pull a sample from your fermenter and split it into two covered containers. Refrigerate one and heat the other to 140°F for an hour, then taste them both. If they taste the same, you're ready to rack your beer out of the fermenter. If you can taste butter in the heated sample, your yeast is still at work, and you should give it another day or two.
