Lyrium is a valuable but dangerous mineral. It comes in three forms, raw, refined, and diluted.
Physical contact with the raw ore will cause serious injury and psychological problems for humans or elves and will kill mages outright. The Miner caste of the dwarves is able to find lyrium veins by ear as they claim that they hear the Stone sing. Then the caste processes the ore into a less dangerous and more useful form. Generations of proximity to lyrium ore veins have made dwarves naturally resistant, though not completely immune, to its effects. Even their resistance is only skin deep, as open cuts and direct exposure to the eyes leaves them vulnerable. Surface dwarves lose this resistance over time.
In its processed form, lyrium may be handled by anyone, but long term exposure or a single mistake while working with it can lead to serious side effects such as emotional instability or complete psychosis. Processed lyrium is used by dwarves and the Tranquil to enchant items. Templars ingest this form to create their abilities to resist and dispel magic, which also leaves them addicted and thus within the control of the Chantry, which controls the lyrium trade.
When mixed into liquid and ingested, lyrium allows mages to enter the Fade when fully aware, unlike all others who reach it only when dreaming. This unique property is essential for the Circle of Magi’s Harrowing rituals. Such potions can also be used to aid in the casting of especially taxing spells, for a short time granting a mage far greater power than the mage normally wields.