Add butter to a medium size pot over medium heat. Chopping the butter into cubes is optional, but not necessary.
Once the butter's melted, you'll see some foaming at the top. This is the start of the fat separating from the milk solids.
Once it starts bubbling, set the heat to medium-low and continue to simmer. You don't need to stir it or anything. Just keep an eye on it!
As the butter continues to simmer, the foam will begin to disappear and for a short while, the butter will be clear. You may end up with browned bits on the side of the pan during this process; those are the milk solids (this is totally normal).
The butter will start to foam a second time. At that point, remove from heat!
Strain the butter into a bowl through a triple-layer of cheesecloth.
Discard the brown bits and pour the ghee into a jar.
Once the ghee is cooled, you'll have a velvety smooth cooking fat.
For top quality ghee, be sure to go with grass-fed! Don't settle for the cheap stuff.