The beacon is used to buff the player with player enchants.
The Beacon is crafted using a nether star, three obsidian, and five glass.
The nether star is obtained by defeating the Wither Boss.
The Obsidian is mined by a diamond pickaxe or greater or made by lava and water cells (IC2)
Glass is made by smelting sand.
Levels of a Beacon:
A Beacon on its own is fairly useless. You need to creates a pyramid using either Iron, Gold, Diamond, or Emerald blocks. The type you use does not matter, however, so it is recommended to use iron as it is the most common. However the size of the pyramid will effect the range and buff the Beacon will provide.
This has only one layer of blocks in a 3x3 square with the beacon on top making a total of 9 blocks.
The range is in a square with a 20 block radius.
This level will only allow for you to have either Speed or Haste.
This has two layers of blocks with a 5x5 base to it and makes a total of 34 blocks.
The range is in a square with a 30 block radius.
This level includes Resistance and Jump Boost and the ones from the previous level.
This has thee layers of blocks with a 7x7 base to it and makes a total of 83 blocks
The range is in a square with a 40 block radius.
This level includes Strength and the ones from the previous levels.
This has four layers of blocks with a 9x9 base to it and makes a total of 164 blocks.
The range is in a square with a 50 block radius.
This includes a secondary effect which can be used with other buffs from previous levels or any of ther old buffs can be used on this level alone to become level 2 effects.
A full vanilla runthrough of the Beacon can be found here