Butty is a British colloquial word for sandwich, or any foodstuff formed by wrapping something in buttered bread. Some use the word 'butty' in place of 'sandwich' in all instances, but others will only describe as a 'butty' a white bread sandwich made with much butter or other grease. Some classic examples include the chip butty and the bacon butty.
The word itself originated in Liverpool, and according to the Bloomsbury Dictionary of Contemporary Slang, spread throughout the UK in the 1960s, when The Beatles sparked a great interest in all things Liverpudlian. This colloquialism is rarely heard outside the UK, although Irish fast food chain Abrakebabra do have a chip butty on their menu.
'Butty' is also an alternative spelling of 'buddy', in the sense of pal or friend. This spelling can be found, for example, in Sean O'Casey's play Juno and the Paycock:
He's an oul' butty o' mine - oh, he's a darlin' man, a daarlin' man.
Our friends in the Bloomsbury Dictionary of Slang reckon that this spelling is the original, deriving from a diminutive