Butterflies are like bees able to pollinate trees, however they don't need a "Home" to live in like bees. Butterflies are a lot rarer than bees. They randomly spawn in the world and can only be caught with a scoop (right click). To release a captured butterfly, use the Q key to drop it from your inventory. Make sure it is day time. Butterflies are inactive at night.
Butterflies breed by putting 2 butterflies together. Its often a good idea to lock the 2 butterflies together in a greenhouse to make sure they dont fly away from each other. Butterflies can breed into new species just like bees.
Butterflies can be analysed in a Flutterlyzer. It will display its Active and Inactive properties
Species (Displays the name of the butterfly species)
Size (displays what size the Butterfly is Small-Large)
Speed (Displays how fast the butterfly will pollinate)
Fertility (displays the area of which the butterfly will pollinate Example: 3x3)
Flowers (Displays what flowers the butterfly needs)
Diurnal (Displays whether or not the butterfly is Diurnal.)
Nocturnal (Displays whether or not the butterfly is Nocturnal.)
Fireproof (Displays whether or not the butterfly is fireproof.
Page 3 on the Flutterlyzer is still a work in progress, but it seems it will be used for possible loot drops from the Butterfly and the Caterpillar of a certain species.
Page 4 displays all possible mutations of the selected butterfly.