I have just made some using an edible image. I just printed out the image onto rice paper, then applied piping gel over them.
Also, under the Articles tab you will find an article on how to make butterflies out of rice paper, and also a lot of other neat articles.
http://www.cakecentral.com/article16-How-To-Make-Realistic-Edible-Butterflies.html
I have seen some beautiful ones in fondant and also royal icing, but have never done those myself.
HTH
You can find a how to article here...
http://www.cakecentral.com/article16-How-To-Make-Realistic-Edible-Butterflies.html
HTH 
Thank you all for the quick responses ! I tried printing the article but was cut off. Is there another way?
Did you try the printer-friendly version?
http://www.cakecentral.com/article-print-16.html
I have some butterflies on my Topsy Turvy cake in my photos. I used color flow for these.
In Whimsical bakehouse they make theirs out of chocolate.
There is rice paper as others have mentioned. I have seen others on the site make them out of fondant, lace, and chocolate molds.
Are their particular butterflies that you saw and like? If there is can you post a picture or a link so we can help you figure out how they were done?
HTH
Leily
The rice paper butterflies are really very easy. Just time consuming. I actually used food coloring markers and drew them myself on rice paper the first time (traced over them really). They turned out really well and got quite the reaction from people. I'm getting ready to work on another batch for a project in July (since I'll be busy, I want to make sure they are done in time).
Thanks for all your very helpful responses! Oh, I found the printer-friendly version 
That would be great to attach a photo for help in identifying the method and will remember to do that. 
My Dad's 80th birthday is in 17 days and he loves butterflies. My goal is to have 80 butterflies for his cake 
Thank you for your help. I've never heard of an edible ink printer. Could you tell me more about that? Does Kinko's have one to use ?? 
I should have said my dream would be to make 80 butterflies, but my goal is to make one REALLY NICE BIG butterfly (with 79 little ones surrounding him - just kidding) 
No, Kinko's won't have one. You need to find a bakery with one. Some of the albertsons will do them for you. I think they tend to charge $10 a sheet and you'd have to bring the rice paper in to them as they only have frosting sheets as far as I'm aware. I go to a little shop in Buena Park at Hobby City to get mine done. There are several ppl on here who have the printers with edible food cartridges too that might be willing to do them for you. You can not print them yourself on your own printer as it has to be a dedicated printer (with just food ink-never having had regular ink through it).
You're welcome anytime. Here's a link to the instructions on this site (where you can download the images to have printed). Makes life much easier when making butterfly's
http://www.cakecentral.com/article16-How-To-Make-Realistic-Edible-Butterflies.html
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