Thatch is a block that can be crafted from dirt and wheat that is used as a building block. It can also be crafted into stairs and slabs, as well as into flooring (see image below). It is most commonly used as the material for roofs in generated structures. It is therefore quite easy to craft/obtain.
Thatch is found in several structures (largely as roofing), namely the Hobbit Farm, the Hobbit Tavern, the Dunlending House, the Dunlending Tavern, the Rohan Mead Hall and all structures of the Morwaith. Also Thatch flooring is used in the Ithilien Ranger Hideout, as flooring.
Thatch is made on a regular crafting table using four dirt blocks and five pieces of wheat. The wheat is arranged in an 'X' shape, as shown in the image below. Thatch can be used to craft stairs, slabs and flooring. The stairs and slabs have the ordinary crafting recipes for such blocks; the Thatch flooring uses the recipe shown below. All of these recipes are performed on a regular crafting table. Thatch is a nice-looking block that has no real purpose other than decoration on roofs, be warned though, as it is very flammable.