Biodiesel is made by separating vegetable oil in a process known as transesterification. This process yields methyl esters (this is the biodiesel) and glycerin that is usually sold to make soaps. This process must be used to allow the oil to flow easily through a nearly unmodified diesel engine. Otherwise the engine will simply be clogged and stop working. The only modification needed for biodiesel is to change out the rubber lines with a synthetic plastic because biodiesel will eventually dissolve the rubber lines.
This is transesterification in a nutshell:
