Hyphae are clusters of cells in a fungus that grow in a branch-like design; mycelium are large groups of hyphae. Large groups of mycelium make up the body of a fungus. It forms after a single spore of fungi germinates to form the hyphae.
In a fungus, growth occurs at the tips of the mycelium, so it continues to branch out as it grows. Mycelium that grow in one long tube are called coenocytic while mycelium that can be divided into sections is called septate.
Mushrooms are an example of a fungus that form with hyphae and mycelium. Often, large clusters of underground mycelium form clusters or circles of mushrooms in a particular area. Yeast is an example of a fungus that does not form with hyphae and mycelium. Instead, yeast forms through a form of cell division called budding.
Fungi eat by absorbing food through their cell walls. In order to eat, they must live where their food source exists. That is one reason that mushrooms grow in clusters; the soil in the area is rich with the nutrients that the mushrooms can easily absorb. The mycelium in fungi help contribute to the nutrients in the surrounding soil and play a vital part in the decomposition of organisms in their environment.