Wasabi is a green horse radish found in Japan.
Its stem is used as a condiment and has an extremely strong pungency more akin to hot mustard than the capsaicin in a chili pepper, producing vapours that stimulate the nasal passages more than the tongue.
It has always been used as a condiment for sashimi since it had properties to bring out the sweet flavors while washing away excess smell of the fish that it may have.
Wasabi has been used in Edo style sushi for its antibacterial properties. It helped prevent food poisoning in the early days when refrigerators were unavailable.
In sushi preparation, sushi chefs usually put the wasabi between the fish and the rice as this preserves its flavor until serving time.
Unfortunately, most of the wasabi sold in the markets are actually modified horseradish with green food coloring.
A special grater (wasabi oroshi) must be used. It has finer grains and is able to break the cells and release the allylisothiocyanate, which is the active ingredient that acts as an anti-bacterial agent. When it is grated properly with this grater, the flavors become very strong as well.
Originally, these graters were made with shark skin.