Ghee is clarified unsalted butter made by heating butter until the curds sink to the bottom and brown. The foam is skimmed off, and then the pure butterfat is poured off, leaving the milk solids behind. When it cools and solidifies, this pure fat is ghee.
You're correct in saying that ghee is saturated fat. In the body it will act the same as regular butter in stimulating cholesterol formation. Ayurvedic medicine practitioners maintain that the harmful elements of butter are removed in the preparation of ghee, but they're wrong about that. Likewise, Indians have high rates of atherosclerosis and coronary heart disease.
Ghee is convenient because it can be kept unrefrigerated, but I do not consider it a healthy fat and don't recommend it. In fact, studies in south Asia and England have implicated ghee in rising rates of coronary heart disease among Indians, Pakistanis, and Bangladeshis. A study published in the July 24, 1999, issue of the British Medical Journal found that South Asians living in England have more coronary heart disease than Europeans despite apparently fewer risk factors. Of course, the use of ghee in cooking isn't solely responsible for increased rates of heart disease among south Asians in England and their home countries, but it clearly is a factor that researchers have singled out.
If you like the flavor of ghee, I suggest using a healthier oil in food preparation and then adding a little ghee for flavor. And of course, if you wish, use ghee freely on the skin for ayurvedic medicinal purposes.
Andrew Weil, M.D.