How do you get obsidian from lava and water?

Solution 1:

Right, the answer is water flow on a lava source. Water/lava interactions work like this:

Water flow + lava source = Obsidian
Lava flow + water source = Stone
Water flow + lava flow = Cobblestone

Solution 2:

You dump water on a lava block - an easy way is to put the lava in a 1 block pit, and flood it with water from the surrounding area. This will destroy the lava and leave an obsidian block behind. Considering that obsidian is hard to mine, its better to use a bucket to take the lava, move it where you need to, and then water it.