Matcha, sometimes spelt macha, is best known as the powdered green tea used in the traditional Japanese tea ceremony, cha-no-yu (sencha has a different ceremony associated with it, closer to the Chinese gongfu cha). It is also used to make green tea ice cream and various kinds of Japanese confectionery. It is the strongest of green teas, with a bittersweet taste and a thick, slightly foamy texture. To make the tea the powder is put into a bowl, hot water is added to it, and then it is whipped with a bamboo whisk until it reaches the desired consistency. Unlike most teas, the leaves themselves are consumed - not just the infusion.
Matcha is powdered tencha - tea which has been covered for a week and a half to three weeks before harvesting to stop them photosynthesising, giving the leaves a deep green colour and concentrating both flavour and nutrients. The same trick is also used to make gyokuro, another fine Japanese green tea, but whereas gyokuro leaves are then rolled to allow them to dry slowly, tencha leaves are laid flat to dry out completely, allowing them to be reduced to the fine powder that is matcha.
Powdered tea seems to have been first invented during China's Song Dynasty (960 - 1279), when something closely resembling today's matcha came to replace the salty tea cakes that had been made popular a few hundred years earlier by the poet and tea master Lu Wu. The people of Sung-era China had a deep love of tea, recognising at least twenty types and holding regular tournaments to see who could come up with the greatest new varieties. The Chan (Zen) Buddhists of southern China developed a ritual for the preparation and consumption of tea which later evolved into the Japanese tea ceremony: The monks would gather around an image of Bodhidharma and drink the tea from a single bowl as a holy sacrament. Alas, when the Mongol hordes swept in and brought an end to to the Song Dynasty and so many of its fruits, the powdered tea was forgotten in China, replaced by whole-leaf steeped teas like gunpowder tea. Meanwhile in Japan, the Sung-style tea was imported in 1191 along with Zen Buddhism by a monk named Eisai Zenji; the tea and the ceremonies around it spread rapidly across the country along with the religion. By the fifteenth century the tea ceremony had developed into something much like its current form, no longer explicitly a Buddhist ritual but preserving the tranquility and harmony of the earlier ceremonies. As The Book of Tea has it:
The beverage grew to be an excuse for the worship of purity and refinement, a sacred function at which the host and guest joined to produce the utmost beatitude of the mundane. The tea-room was an oasis in the dreary waste of existence where weary travellers could meet to drink from the common spring of art-appreciation. The ceremony was an improvised drama whose plot was woven about the tea, the flowers, and the paintings.
with thanks to http://www.japantea.com/tea/matcha.html and Kakuzo Okakura's The Book of Tea.