Mud volcanoes, contrary to their name, are not really volcanoes at all. Volcanoes are formed by magma being extruded from the Earth, usually as a result of crustal plate movement or hot spots bringing magma plumes from the Earth's mantle and piercing through the crust. There are no lava flows associated with mud volcanoes. Although, mud volcanoes may form indirectly from magma intrusions. Mud volcanoes are so safe that some people even bath in them! We at the Geology Flannelcast do not recommend bathing in a normal volcano, like the ones you see in Hawaii or Iceland. Those real volcanoes are just a little bit hotter. Mud volcanoes most likely got their name because they look like tiny volcanoes that spew out mud.
Mud volcanoes usually form from heated underground water, much like a natural hot spring that you would see in Iceland or Yellowstone National Park. The water can be heated by deep subsurface magma plumes. This is how mud volcanoes are indirectly caused by magma intrusions. The heated water begins to dissolve the surrounding rock and in doing so creates a mud slurry. This mix of heated water and minerals is pushed up through faults and fissures until it eventually reaches the surface and spews out this muddy mixture.
Mud volcanoes are usually harmless. The people in the image below are even bathing in the mud slurry. Mud volcanoes can range in temperature from boiling to near freezing. They tend to be associated with subduction zones, where two plates collide and one is forced under the other. They range in size from meters wide (usually called mud pots at this size) to the biggest being named Lusi located in Indonesia being 10 km wide.
These geologic features can do some damage however. A mud volcano in the town of Piparo, Trinidad erupted in 1997 covering portions of the town with the thick mud slurry. Some houses were completely covered in the mud from floor to ceiling. The slurry then quickly hardened into a concrete like substance, thus locking in any houses and cars that lie in its path.