A butterfly chrysalis is made out of chitin. Caterpillars shed their skin several times as they grow; each skin is made out of chitin. A chrysalis is a special, very hard layer of chitin that grows straight out of the insect just like all the previous skins.
A caterpillar which has molted into a chrysalis is a called a pupa. Sometimes pupa and chrysalis are used interchangeably when discussing the external appearance of a developing insect in this life stage. A chrysalis is not to be confused with a cocoon, an outer covering of silk which completely encloses a pupating insect. Cocoons are spun with organs called spinnerets and are separate from the animal's body. Butterflies do not form cocoons.