Tequila is made from the blue agave (Agave Azul), which is native to Mexico. Agave Azul grows in the Aztec Highlands, near the city of Tequila, and is a succulent plant that forms rosette-like growth and long, pointed leaves.
To make tequila, the leaves of the agave are cut off to reveal the heart of the plant, called the "piña." This agave piña is then baked or boiled to activate the natural enzymes in the plant and convert the starch into sugar - this is the process to produce the agave juice. The liquid obtained is then fermented and distilled in barrels to ultimately produce tequila.
Most tequilas are made with at least 51% Agave Azul; tequila with 100% Agave Azul is called "Tequila 100% Agave" and is considered a higher quality tequila. Tequila is a legally protected term and can only (!) be made from the blue agave and produced only in Mexico - certain areas, in particular around Jalisco and other bordering states are exclusively approved for the cultivation and production of Tequila.