It seems that the butter flavor contains a chemical called diacetyl, which can cause some nasty side effects.

from the New York Times:

September 5, 2007
Doctor Links a Man’s Illness to a Microwave Popcorn Habit
By GARDINER HARRIS

A fondness for microwave buttered popcorn may have led a 53-year-old Colorado man to develop a serious lung condition that until now has been found only in people working in popcorn plants.

Lung specialists and even a top industry official say the case, the first of its kind, raises serious concerns about the safety of microwave butter-flavored popcorn.

“We’ve all been working on the workplace safety side of this, but the potential for consumer exposure is very concerning,” said John B. Hallagan, general counsel for the Flavor and Extract Manufacturers Association of the United States, a trade association of companies that make butter flavorings for popcorn producers. “Are there other cases out there? There could be.”

A spokeswoman for the Food and Drug Administration said that the agency was considering the case as part of a review of the safety of diacetyl, which adds the buttery taste to many microwave popcorns, including Orville Redenbacher and Act II.

Producers of microwave popcorn said their products were safe.

“We’re incredibly interested in learning more about this case. However, we are confident that our product is safe for consumers’ normal everyday use in the home,” said Stephanie Childs, a spokeswoman for ConAgra Foods, the nation’s largest maker of microwave popcorn.

Ms. Childs said ConAgra planned to remove diacetyl from its microwave popcorn products “in the near future.”

Pop Weaver, another large microwave popcorn producer, has already taken diacetyl out of its popcorn bags “because of consumer concerns” but not because the company believes the chemical is unsafe for consumers, said Cathy Yingling, a company spokeswoman.

Read ^[1] the rest of the article.

Update: I seems that some manufacturers are dropping ^[2] diacetyl.