Every year, especially if it rains and I haven't mowed my lawn for a couple of weeks, mushrooms sprout. I don't eat the fungi, and I certainly don't want them on my lawn. They're unsightly. However, not all mushrooms are bad, although some spread disease. Mushrooms contain the reproductive parts of certain fungi. Mushrooms like to chow down on tree stumps, agricultural waste and other decaying matter including animal waste. 'shrooms break down the organic material and release nutrients that can help grass grow.
Mushrooms often sprout from buried and decaying construction lumber and other organic substances. Sometimes mushrooms can discolor the lawn by stimulating grass growth in certain areas, creating a ring in the grass. In other cases, fungal growth permeates the soil, stopping water from penetrating, killing the grass in the area.
If you want to get rid of mushrooms, water less. Or, you can do what I do: mow over the tops or take a 9-iron and swat them like golf balls. Cutting the top off a mushroom does not kill the fungi underneath the soil, but you won't see the toadstool again for a few weeks [source: Weekend Gardner].