Perlite is the name of a naturally occurring mineral. In nature, it exists as a type of volcanic glass, created when the volcanic obsidian glass gets saturated with water over a long time.
 
There are several reasons why perlite is such a useful additive to gardens and hydroponic setups. They mainly stem from its unique physical and chemical properties:
Perlite is physically stable and retains its shape even when pressed into the soil.
It has a neutral pH level
It contains no toxic chemicals and is made from naturally occurring compounds found in soil
It is incredibly porous and contains pockets of space inside for air
It can retain some amount of water while allowing the rest to drain away
These properties allow perlite to facilitate two critical processes in soil/hydroponics, which are essential for plant growth:
Aeration
 
All plant cells need oxygen, even those that are underground. The green parts up top are capable of creating it during photosynthesis.
But down below, the root system has to absorb it from the soil. Aerating the soil allows little pockets of air to remain, which helps with the growth of strong root systems.
Draining
Without water, no living thing can survive. But when it comes to plants, excess water in the soil can lead to drowning.
In this situation, the root system is starved of oxygen, causing eventual death. Proper drainage is crucial to allow empty air spaces to remain in the soil.
Adding perlite to the soil improves its drainage capabilities, as it has excellent filtering and water draining capabilities. The presence of all those pores allows most of the excess water to drain off.
And those air pockets also mean that perlite is great for root systems as well. When the soil gets packed down, the air pockets are lost. But since perlite is a harder mineral, it retains its shape, keeping those air pockets around for the roots.
 
How To Use Perlite In The Garden
 
In Soil Mixes: you can make your own homemade soil mixes using a combination of perlite, loam, and peat moss in equal measures. In pots, it keeps everything loose, aerated and well draining.
 
On the surface: perlite can be scattered on the surface of the soil as well, where it acts as a wicking agent. It will gradually work down into the soil, improving drainage.
 
For root cuttings: it encourages root growth much better than just plain water. You can place your starting seeds or cuttings in an air-filled Ziploc bag contained moistened perlite for several weeks.