Considering the preponderance here on E2 about nutmeg's ability to get you whacked, you could be forgiven for forgetting that it has numerous other uses as well. Of course, this deliciously aromatic spice is a mainstay of classical European pastry work and is included in many cool weather alcoholic drinks. Nutmeg also has an intriguing and turbulent history as one of the main products lusted after by spice traders.
Nutmeg is the seed contained in the fruit of the nutmeg tree Myristica fragrans native to the Banda Islands, or Spice Islands of East Indonesia. The yellow nutmeg fruit looks a little like an apricot - nectarine hybrid, which itself is of limited culinary appeal, apart perhaps from a local Indonesian preparation - manisan pala, which is sliced and candied nutmeg fruit. Once the fruit is split open, an astonishing centre is revealed. The seed is encased in a blood red net, or aril, which is another spice known as mace. Underneath this net is the seed itself, about the size of a grape - the nutmeg.
Europeans knew nutmeg as early as the Twelfth Century, but it was not until Portuguese traders discovered the Spice Islands that its popularity - and value, soared. In fact the trade in nutmeg was so profitable to the Portuguese that Dutch traders wrested control of the Islands less than a century later. The Dutch were keen to become the sole traders of the spice, which would virtually guarantee them a license to print money. As part of these efforts they systematically destroyed nearly every nutmeg tree in East Indonesia, save for a few small pockets in the Bandas which were under their control. Of course, you can't toy with Mother Nature in this fashion and hope to be successful. Local fruit pigeons swallowed nutmeg seeds and carried them to other Islands, and although the trees take 15 years to reach a fruiting maturity, populations were eventually again established.
After another 2 centuries of Dutch dominance, the British, under the guise of the East India Company took control of trade in the Bandas and began introducing nutmeg to other areas in South East Asia such as Singapore and Malaysia. These days apart from Indonesia; Sri Lanka and the West Indies are the major producers of nutmeg.
Most western cooks immediately think of sugar when considering nutmeg, atop such confections as custard tarts and doughnuts. To classical European cookery, nutmeg is perhaps one of the most important spices used in sweet dishes, following vanilla and cinnamon. However, in other parts of the world - particularly Asia, nutmeg is more often used in a savoury sense. It is a major component in the many garam masala blends of India and many Indonesian and Malay curry powders call for nutmeg in the recipe. In Italy, some ground meat preparations such as fillings for ravioli and tortellini add nutmeg as a flavouring in addition to garlic, pepper and parmesan cheese.
The spice is also a popular ingredient in alcoholic drinks such as eggnog and brandy alexander. As has been well covered above, nutmeg contains myristicin and thujone that apart form their own effects, can increase the potency of alcohol. This may be how the historic pairing of nutmeg and alcohol came about.
Nutmeg is always used finely grated. There are specialty nutmeg graters available for this purpose, but the finest holes on a regular kitchen grater will work just fine as well. Once grated, nutmeg rapidly loses its pungency, so always try to purchase nutmegs whole and grate the amount you need to order. If pre-ground nutmeg is your only choice, buy it form a popular store that has a high turnover and look for nicely coloured pale ochre to brown powder. Eschew any that is grey in appearance.