Spice was the term for various mind-altering drugs in the Star Wars universe. It could be smoked in a hookah, snorted, injected or just looked at. Spice wasn't spicy at all really. It tasted like day old Rancor sweat. Though valuable, it was always seen as the bottom of the barrel in the commidities market, right above Bespin Ice-Cream.
800px-Owen Luke

Uncle Owen shows Luke how to get high on spice by pointing at it.