Biofuel is made by converting biomass into liquid fuels (if interested check these biofuel basics out). The most common types are ethanol (Average Octane (AKI rating/RON) - 99.5/108.6 which is a higher octane rating than most petroleum) and biodiesel which is the product of the convertion of oils and fats of natural origin into fatty acid methyl esters (Average Octane (AKI rating/RON) of methanol is 98.65/108.7). And I had a chemistry homework to make biodiesel at home - and I actually made it. Here is the guide I followed. But be careful and do not forget about safety. As to how it works - easily - just use it instead of petrol, though you may need to adjust the engine. And here is one more article on how biodiesel works. Best